Seeing a financial advisor is a great way to establish an investment strategy, but Matthew Murawski advises millennials to ask three key questions before making their choice.
Ensuring Millennials Get the Financial Guidance They Need
Matthew Murawski provides financial advice for a wide variety of clients, and he says there are three points that millennials, in particular, should be paying attention to. The combination of the current financial landscape and the time horizon that this group should be aiming for leads to some simple questions that could make a big difference.
1. What Are the Average Expense Ratios for the Funds You Use?
Many long-term investors choose to invest in mutual funds and ETFs. These funds are mostly managed by large organizations, and Murawski says that, in general, the actual compositions may not vary significantly.
Because stocks of the same asset classes that make up the bulk of most funds are largely the same, other factors need to be considered beyond composition. Returns and how long ago the fund was established are important points to look at, but so are the average expense ratios.
Murawski says that this value is among the most significant factors to consider, especially over the time range of 20, 30, 40 years. In general, expense ratios should be well below 0.75%, although this can vary depending on asset classes and categories.
2. Are You a Fee-Only Fiduciary?
A fee-only fiduciary is one who is only paid by the clients seeking their financial advice and acts in the best interest of the client, and Murawski explains that this is the only way to go when choosing a financial advisor. Otherwise, there is always the risk that conflicts of interest could lead to advice that isn’t in your favor.
Some financial advisors receive commissions or other payments based on the mutual funds and products they sell. While they are still obligated to advise suitable products, they aren’t obligated to follow the fiduciary standard. Instead, they can receive revenue from third parties trying to push certain products.
3. As an Advisor, What Is the Biggest Investment Risk for Millenials?
Millennial investors need to know that their trusted financial advisors are on the same page when it comes to their investing goals and what the potential risks involved are. Murawski says that, in his opinion, inflation is the largest risk today and that a good advisor will say the same.
The current high inflation rates are causing purchasing power to erode quickly, and investments that aren’t keeping pace can have millennials falling behind in their financial goals. While taking on higher yield investments means higher risks and more susceptibility to market shifts, investing in assets that have a real negative return can be costly over the long run.
Finding the Right Financial Advisor for You
Choosing the right financial advisor will have a big impact on the investment strategies that millennials implement. Murawski says that picking the right one is absolutely essential. They should provide guidance on quality investment products, be transparent in their dealings, and be able to work with their clients to define and understand their financial goals.