How to Get Started With a Financial Advisor

You don't have to have hundreds of thousands of dollars stashed away in a 401(k) to benefit from working with a financial advisor. An advisor can help you identify your financial goals, investment time horizon, and risk tolerance, and then design an investment strategy that's consistent with your goals and aligned to your financial situation.

Just talking with an advisor can help you identify potential gaps or shortcomings in your current financial plan that might be difficult for you to spot on your own. Here are a few questions to ask when you meet with a financial advisor to gauge the health of your investment portfolio:

1. How does the performance of my investment portfolio compare to benchmarks?

A financial advisor can compare the returns of securities and funds you own to the appropriate benchmarks to determine their relative performance against similar securities and funds. The S&P 500®, Dow Jones Industrial Average, Barclays Aggregate Bond Index, and Russell 200 Index are a few common benchmarks.

2. Am I on track to meet my long-term financial goals?

Since goals like retirement are long term in nature, you should monitor your progress toward them on an ongoing basis. An advisor can help you determine if you need to make course corrections.

3. Is it time to rebalance my portfolio? 

Over time, market movements can knock your asset allocation out of balance. This is why it's important to regularly monitor your asset allocation and rebalance your portfolio by buying and selling securities in different asset classes as necessary. You'll want to be mindful of the income tax impact when making these adjustments to your portfolio. A financial advisor can help you with this endeavor.

4. Have I maximized my use of tax-advantaged investment vehicles and accounts?

For example, qualified retirement accounts like IRAs and 401(k)s can reduce taxes on your retirement savings, while tax-free investment vehicles like municipal bonds can be used to meet other financial goals.