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Questions to Ask Your Financial Adviser

The new RDR rules mean that investors are going to want to start asking their financial advisers more pointed questions

This article was written by Jacqueline Lockie from the Association of Investment Companies (AIC). It is part of Morningstar’s special series about the Retail Distribution Review (RDR) and Morningstar's "Perspectives" series, which is a series of articles written by third-party contributors.

The Retail Distribution Review (RDR), which was put in place at the beginning of this year, requires financial advisers to have a much broader knowledge of financial products; much more so than previously required. This may mean that at a client’s next portfolio review, other products may be considered to be more appropriate. In light of this, it may be a good time for clients to work with advisers to review their portfolio.

Questions to Ask Your Adviser

1. How often will your portfolio be reviewed? Will it be reviewed more or less frequently following the implementation of the new RDR rules?

2. Your objectives as an investor: Have you told your adviser what you want to achieve with your money? Rather than simply asking for maximum returns from minimum risk, be specific, for example, a new house, or a specific amount of income in retirement. Setting your own objectives, not going along with what your adviser thinks they can deliver, is key.

3. How will the performance of your portfolio be assessed against your objectives?

4. How does your portfolio spread risk to achieve your objectives? Learn and understand different asset classes, such as cash, equities and fixed interest securities.

5. What benchmarks does your adviser use? If your adviser uses benchmarks to show how well your money is doing, ensure you fully understand these, and how they show the likelihood of you reaching your investment objectives. Some advisers will use APCIMS or other indices to show how well your portfolio has done, but be sure to ask how they help you achieve your objectives.

6. How will the adviser select the individual investments to meet your objectives? Do they research the whole market, and if not, why not? How could not doing this impact the likelihood of achieving your objectives?

7. What types of investments will be considered? For example, will the adviser be using investment companies, open-ended funds, exchange traded funds (ETFs), etc? 

For those investors who are looking for a financial adviser, read "Why and How to Find a Financial Adviser" and refer to the booklet "Questions to Ask When Choosing a Financial Planner" by the Institute of Financial Planning.

Jacqueline Lockie is a fellow of the Institute of Financial Planning and holder of the Certified Financial Planner licence, for which she was one of the first examiners in the UK.  She also holds the Investment Management Certificate and the Professional Investment Certificate.

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The views contained herein are those of the author(s) and not necessarily those of Morningstar. If you are interested in Morningstar featuring your content on our website, please email submissions to UKEditorial@morningstar.com.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author The Association of Investment Companies (AIC)

The Association of Investment Companies (AIC)  was founded in 1932 and represents a broad range of closed-ended investment companies, incorporating investment trusts and VCTs.