This summer has been flying by for me—how about you? I got to go a horse show this past weekend and finally rode my first third level test! For anyone who doesn’t know what that means just tell me “Good Job, Tara.”
Do you remember being a kid and in between playing with your friends sometimes imagining what your future would be like? I used to spend a lot of time day dreaming about riding fancy show horses. Well, I have arrived and am now living this dream. I remind myself that my riding and pursuit of dressage is my passion. It is one of my motivations for investing and creating the life I want to have.
When you are creating your ideal life you need to have a supporting team around you. You need your doctors, dentists, babysitters, your tax advisors and yes, financial education and possibly an advisor. There are many experts available and the key is finding a person that is a good fit for you. Your advisor should feel like someone you’re not only able to call but happy to call.
Let me share some questions you should ask as you interview financial advisors.
Where Do I Begin
First, decide what help you need. Then talk to family members, friends, your accountant, your lawyer. Get some names. And then the fun begins! Do not assume since your brother-in-law or co-worker or BFF recommends a particular financial advisor, that person is a good fit for you. You need to do your own due diligence to determine whether you want to work with someone.
Researching a Potential Advisor
Do they have a website? Look for their SEC or FINRA registration information on the website. You can also check out financial advisors by going to the Financial Industry Regulatory Authority website at www.finra.org, and click on Brokercheck. It’s very easy, and you will find out all kinds of background information about the financial advisor - where they have worked, any complaints registered against them, and what licenses they hold for securities. If they are a Registered Investment Advisor (RIA), you can go to the Securities and Exchange Commission website at www.sec.gov, and click on Check Out Brokers and Investment Advisors.
Call Them for a Brief Interview
Talk to a potential financial advisor briefly on the telephone to determine whether you are the type of client they specialize in. Do they have account minimums? Do they work with people like you? If they do, set an appointment to do an in-person interview with them. Ask them if they will charge you for an initial consultation – most advisors will not. And yes, I did mean to say interview – you are interviewing the financial advisor to see if this is a relationship you want.
Meet in Person
Here is where your due diligence process comes in. It is up to you to determine whether you want to work with this financial advisor. Think about all the investigation we do when buying an appliance, or a car, or furniture for our home. Get face to face with them, and ask every single question listed below! In fact, print this questionnaire and take it with you to your meeting. This is your financial future we are talking about, and you need to do the homework!
Questions You Need to Ask
1. Why are you a financial advisor? This is not the most important question of all, but it will help you determine if their focus aligns with your ideas of investing.
1. Why are you a financial advisor? This is not the most important question of all, but it will help you determine if their focus aligns with your ideas of investing.
2. What licenses and certifications do you hold? There are many different licenses available that qualify advisors to offer specific services. Ask them what licenses they hold and to explain briefly what they can and cannot do. Make sure they are licensed to sell securities in your state, and if they have any special certifications that may be important in working with you.
3. Who is your ideal client? You want to know if they have experience with and enjoy working with people just like you!
4. Are you a fiduciary? A fiduciary is required to act with undivided loyalty to the client, disclose exactly how they are compensated, and disclose any possible conflict of interest in working with you. You want this in your advisor.
5. How do you make your money? Are you commission-based, fee-based, or a fee-only financial advisor? Make the advisor tell you exactly how they are paid! You want to know how subjective an advisor is, and if they could be influenced by compensation they could earn from an investment, or limited in what types of products they can offer.
6. What is included, and what is not included in your fees? Do they have different fees for different services, and what are those fees?
7. Will you work with me personally, or will you pass me off to someone else in your firm? If it is very important to you to work with this advisor only, you want to know this up front.
8. Who will take care of me if something happens to you? If this advisor gets run over by a bus tomorrow, who will take care of your investments?
9. Where do you hold your securities? Who is the custodian for your investments? Have your advisor explain the role of a custodian to you. Very important – hint, hint, Bernie Madoff!
10. How do you communicate with your clients, and how often? How often will you receive statements on your investment? How often does the advisor recommend you meet with them - quarterly, yearly, or more? Does the financial advisor have other means of communicating with you on a regular basis - email, newsletters, and conference calls? Tell the advisor what you expect to receive.
11. Do you receive referral fees from attorneys, accountants, insurance agents, mortgage brokers, or any other 3rd party professional if you refer me as a client? If they do, this is a big red flag. Maybe the accountant is a good fit for you, or maybe they are referring you to them to make the referral fee.
12. Do you receive any incentives (financial or non-financial) for recommending specific investment products? If they do receive incentives, be sure the product is right for you, and not just for the financial advisor earning a vacation or some other benefit to them.
13. Finally, and most important, do you feel comfortable with this financial advisor? Do you think you can trust them? Do they talk down to you? Can you feel secure trusting your financial future to this financial advisor?
There are no stupid questions. There are many details and there is no way you should be expected to know all the answers. Let me relate this to my previous flying experience. Even though you’ve flown across the country on an airplane, you probably didn’t know how much fuel was required for the plane to make the trip. This is an important detail for you to reach your destination but not one you need to know personally. However, your pilot should be happy to answer this question for you and more, if you wanted to know!
Also remember…
If you have questions and would like to learn a little more about me please visit my website www.taraenolan.com.
Cheers,
Tara J
www.taraenolan.com
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