7 Questions to Ask Your Financial Advisor Every Year

While you may meet with your financial advisor throughout the year to discuss your concerns and plans, a yearly review can be especially valuable. It allows you to look back at how your finances have performed, assess where you stand now, and prepare for what lies ahead. This helps ensure you are making the right decisions and clearly understand your financial position.

This article explores seven questions to ask your financial advisor every year to make sure you are on track to attain your goals or to gain clarity if you are not.

Below are 7 questions to ask your financial advisor during an annual review:

1. How have my investments done this past year?

Your annual review is the perfect time to check in on how your investments have performed over the past year. This is not just about numbers but about understanding whether your investment portfolio aligns with your financial goals. Did your investments grow as expected? Are they helping you get closer to milestones like retirement or funding your child’s education? Evaluating the performance of your investments also allows you to decide whether you should continue with the same investments or make changes. For instance, if an investment is not meeting your expectations, you can reassess its role in your portfolio.

On the other hand, if an asset has demonstrated good performance, you can continue and might even consider increasing your contributions to capitalize on its growth. Additionally, your financial advisor can help you analyze whether you are investing enough to meet your goals or if you need to make adjustments. For example, if your portfolio is showing slow growth, you may need to increase your contributions or diversify your investments.

This conversation can also give you insights into market dynamics. You can observe how the broader market has influenced your portfolio and analyze if your investments remained steady during volatile periods or experienced significant fluctuations. Analyzing these patterns can enhance your understanding as an investor and help you make better decision-making in the future.

2. Is my financial and estate plan up to date with my current personal and financial situation?

Each year can bring significant changes in your life, both personal and financial. These may require adjustments to ensure your plans reflect your current situation and future goals. An annual review with your financial advisor is the perfect opportunity to address these changes. For instance, in case of a health condition, your spending habits and savings strategy might have changed over the past year. Your investment portfolio may need rebalancing to ensure you have sufficient liquidity to cover ongoing healthcare costs without jeopardizing your long-term goals.

A new job or business venture can also bring financial changes. In case of increased income, you need to explore opportunities to invest more. Conversely, if you have less liquid cash due to business commitments, job loss, or other factors, you might need to adjust your savings and spending patterns. Your financial plan should always align with your current cash flow and long-term objectives. Asking your financial advisor if your financial plan is up to date with these changes can help ensure you make the right investment choices going forward.

Personal life changes can be equally impactful on your finances. Getting married, having children, separating, or divorcing all require updates to your financial and estate plans. It is critical to revisit beneficiaries on life insurance policies, retirement accounts, etc., to ensure they align with your wishes. If you have experienced major life events, you may also need to update your will, create trusts, set up health directives, or assign guardians for your children. Ignoring these updates can lead to complications for your loved ones down the line. Therefore, you must ask your financial advisor whether these life updates have been incorporated into your financial and estate plan or not.

3. How do I prepare for my upcoming goals for the year?

Every year, a lot of people set milestones, like moving to a bigger home, relocating to a new city, eliminating debt, traveling more, or pursuing other personal aspirations. Whatever your goals may be, discussing them with your financial advisor can help you create a solid plan to make them a reality.

For instance, if you are planning to buy a house this year, even if you have been saving for years, it is essential to strategize with your advisor about how to access those funds. Questions to ask a financial advisor might include: “How do I liquidate my assets for this purchase?” or “Is now a good time to sell my investments?” Your savings may be tied up in investments like stocks, bonds, cryptocurrencies, or even real estate, and a financial advisor can help you decide whether it is the right time to liquidate or wait for better market conditions. They can also help you prepare for additional expenses, such as property taxes, renovations, etc.

Your upcoming financial goals may also involve streamlining your financial life. For example, if eliminating debt is on your agenda, your financial advisor can help you prioritize which debts to tackle first. They can also suggest strategies to adjust your budget to free up more money for repayments. If your goal involves selling a house or another asset, you can discuss the timing with your financial advisor. They can help you understand market trends so you can decide whether it is a favorable time to sell or if it might be better to hold off.

4. What is my current net worth?

Your net worth can change from year to year. Ideally, it should grow over time. However, depending on the financial choices you make, it could go in either direction. That is why it is essential to regularly assess where you stand financially to ensure you are headed in the right direction. Calculating your net worth can be challenging, as it goes beyond just the cash sitting in your bank accounts. Your net worth also includes other assets like real estate, stock holdings, bonds, and retirement account balances. Additionally, it includes any liabilities you may have, such as your mortgage, credit card debt, etc.

A financial advisor can provide you with a clear, realistic picture of your current net worth. They can help you gather all relevant financial information and accurately calculate both your assets and liabilities. Additionally, a financial advisor can compare your net worth to previous years and help you assess your progress over the years. This can help you understand where you stand now and how your financial situation has changed so you are better equipped to make informed decisions toward your long-term financial goals. An annual check-up allows you to see if you are moving in the right direction and helps you make adjustments if needed.

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5. How do I plan ahead for the changes announced for the coming year?

An annual financial review at the end of the year is an excellent opportunity to discuss any changes in laws, regulations, or benefits that could impact your finances in the coming year. From new contribution limits for retirement accounts to new Medicare rules and gift tax exemptions, it is crucial to address these changes proactively. Here are some important questions to ask your financial advisor to ensure you are prepared:

• What are the new contribution limits, and how can I maximize my investments? For 2025, the contribution limits for retirement accounts have increased. The 401(k)-contribution limit has been increased to $23,500, up from $23,000 in 2024. Additionally, the Individual Retirement Account (IRA) contribution limit is $7,000. If you are over 50, you can take advantage of catch-up contributions of $7,500 for 401(k) plans and $1,000 for IRAs. Under the SECURE Act 2.0, the catch-up limit for 401(k)s further increases to $11,250 for individuals aged 60 to 63. Discuss with your financial advisor whether you are in a position to maximize these contributions. If not, ask them what steps you can take to work toward that goal. Additionally, you might want to explore whether fully maximizing these accounts is the best use of your money or if diverting some funds to other investments, such as an HSA, stocks, etc., makes more sense for your financial plan.
• How do the changes in Medicare affect me? Medicare updates can impact your healthcare expenses. For instance, starting in 2025, there will be a $2,000 annual cap on out-of-pocket prescription drug costs under Part D. Additionally, Medicare may expand its coverage to include more mental health care services, caregiver support, and certain weight-loss medications. You can ask your financial advisor how these changes align with your healthcare needs and if you need to adjust your savings strategy to account for out-of-pocket costs.
• What are the new gift tax exemption limits? Individuals can gift a certain amount each year tax-free. For 2024, the annual gift tax exclusion is $18,000, and it increases to $19,000 in 2025. Married couples can jointly gift double these amounts tax-free. If you are planning on leveraging these provisions in the coming year, you must ask your financial advisor how to best use them in your estate planning and wealth transfer strategies.

These are just a few examples of questions to ask a financial advisor during an annual review. Once you get the conversation flowing, your advisor may also bring up other updates relevant to your financial situation, such as changes in tax regulations, new state-specific laws, and others.

6. Is my retirement planning on track?

Regardless of your current age or when you plan to retire, you must regularly assess whether your retirement planning is on track. You can never save too much for retirement, as it is a long-term goal that requires consistent efforts. Many people find themselves behind their ideal savings targets due to challenges like inflation, volatile markets, and health concerns, so taking charge and staying informed about your progress is essential. Here are some questions to ask a financial advisor about retirement planning:

• What is the net worth of my retirement accounts? Apart from your overall net worth, you must also know the account balance of your retirement accounts. Asking your financial advisor the total value of your retirement accounts every year helps you know if you are saving enough or if you need to contribute more. This includes your 401(k), IRAs, and any other retirement savings. You can review your retirement account balances annually and ask your financial advisor if any adjustments need to be made.
• Is my retirement portfolio tax-diversified? Tax diversification ensures that your tax liabilities are balanced. Having a mix of tax-deferred and tax-free accounts in your retirement portfolio is advised. For example, if you are only using a traditional 401(k) or IRA, you will pay taxes when you withdraw your funds in retirement. You can discuss moving some of your funds to a Roth account to maintain a more tax-diversified portfolio and reduce your taxes in retirement.
• Is my retirement portfolio inflation-adjusted? Inflation will reduce your purchasing power in retirement. Therefore, you must understand if your funds are generating enough returns to outpace inflation. Your financial advisor can help ensure that your retirement portfolio is invested in inflation-beating funds like stocks and other investments that can outpace inflation over the long term.
• Do my retirement goals seem realistically achievable? It is essential to assess whether your retirement goals are realistic. This can be done by evaluating your income, savings rate, expected returns, etc. Your financial advisor can help you assess your portfolio and suggest modifications if your goals need to be altered based on your financial situation and timeline.

7. I am retiring next year, so what can I do to ensure a smooth transition?

If you are retiring in the coming year, you will require your financial advisor’s help to ensure a smooth transition. You can discuss creating a detailed post-retirement budget based on your expected expenses, such as healthcare, utilities, etc. It is also crucial to determine your withdrawal strategy. A financial advisor can help you identify the best withdrawal rate from your retirement accounts, considering factors like inflation, market conditions, and your life expectancy.

Social Security is another key area to address. If you are planning to work part-time during retirement, your earnings could impact your Social Security benefits. You need to discuss the best time to start withdrawing benefits with your financial advisor to ensure your benefits are not reduced. You can also discuss the changes required to your investment portfolio. Your risk appetite reduces in retirement, and your advisor can help you shift towards more low-risk, stable assets that can offer peace of mind along with some growth potential to keep up with inflation.

To conclude

Asking these questions is crucial for aligning your financial situation with your evolving needs. They ensure that you and your financial advisor stay on the same page while offering you clarity about where you currently stand and identifying areas for improvement. Additionally, these questions provide perspective on what lies ahead, enabling you to adjust your plans in response to changing rules and regulations.

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