A new year and a new tax season can be a good time to evaluate your investments and your financial adviser. What makes your client experience unique? This will give you insight into whether their strengths are the ones you seek in an adviser. If the person can’t answer these question quickly and succinctly, you may want to consider other options.
As you speak to advisers, here are some questions you can ask to make sure you’re headed in the right direction.
1 . Are you a fiduciary? A fiduciary is a person who has to place the client’s interest ahead of his own. Fiduciaries also must disclose what their fees are, how they’re compensated and any other conflicts or potential conflicts of interest that might influence an individual’s decision to use their services.
Does your adviser work for you as a fiduciary? If so, is he operating in this manner 100 percent of the time?
2. How do you charge for your services, and how much? Is there an initial fee, does the adviser charge a percentage for assets under management or make money from selling you a certain product? In other words, does the adviser have an incentive to sell products to you?
Is the fee or commission charged upfront? Does the adviser have relationships with certain companies and money managers? Does the adviser focus on proprietary investments or is the adviser able to consider the entire universe of available options when constructing your portfolio?
3. What licenses, credentials or other certifications do you have? How long has your adviser been in the business? Is he committed to continuing education? Does your adviser have a graduate degree or professional designation? Tax laws and the financial markets are always changing, so make sure your adviser is on the forefront of these changes and able to make you aware of how the adviser can impact your situation.
4. What services does your firm provide? Do you provide investment advice only or is more comprehensive planning available? Will you help me with noninvestment-related assets like a family business or real estate? Can you advise me on contingency planning that takes care of my family should something happen to me? Do you have experience working with a special-needs child? Can you tell me if the planning I’ve done today will ensure family harmony in the future?
5. What is your investment approach? Does your adviser have a personal philosophy toward investing? Is the adviser focused on the long term, or does the adviser make a lot of tactical changes in the portfolio? Do this person use low-cost funds or employ more expensive money managers? Can you expect a lot of volatility or a return consistent with your risk tolerance?
6. How much contact do you have with your clients? How often can I expect to hear from you? Will we have regular meetings, or can I expect to meet once a year? What issues do we plan to discuss in the next year? Will you help me communicate with other professional advisers, such as an attorney?
7. Will I be working only with you or with a team? Since one person cannot be an expert in everything, some companies offer a team approach rather than relying on one individual for service. Would you benefit from working with a variety of experts? If you work with an individual, what happens to your life’s savings when that person gets sick or leaves his organization? Do you have a succession plan in place for these potential scenarios?
Andrea McKinney is vice president of wealth management with the Springfield branch of Central Trust & Investment Co. She can be reached at andrea_mckinney@centrustco.com.
