Thursday, June 16, 2011

Questions to Ask Before You Consider Moving Assets to Another Advisor

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

A fact of life every adviser faces is the knowledge that our clients regularly receive solicitations from other advisers, money managers, brokers and investment companies.

Some clients will leave to take advantage of those offers. What really hurts, however, is seeing former clients damaged by poor advice, or advice that does not take into consideration the client’s situation.

With that in mind, we present questions you should ask of any adviser who solicits your confidence and the management of your financial assets:

What is the adviser’s experience and how will your assets be managed?
Don’t just accept the adviser’s word. Verify.
Information on a Registered Investment Adviser can be found  throught the Securities Exchange Commisison (SEC). Information on brokerage firms and individual brokers can be found here. If the individual is not registered, it is a red flag.

If the individual uses a particular investment approach, find out how long it has been in use and what the results are.  Results too good to be true usually aren’t.
How will your assets be held?
Ideally, your assets should be invested in a separate account in your name at a national custodian or brokerage firm. You should be able to independently verify the status of your account. Your adviser should have no access to funds in the account other than a preauthorized ability to withdraw periodic fees. If you do not have transparency, your risk increases. Deposits should never be made out to the individual.

How is the adviser compensated? 
Does that compensation present a possible conflict of interest?  If the individual is paid to solicit your investment in a specific money manager or investment vehicle, is their advice unbiased and in your best interest?

Has the adviser asked the right questions?
Your adviser should understand what you want to accomplish and how a recommended investment fits with your financial situation. You don’t want an adviser who is selling a solution without finding out what you need. 

Is the recommended investment appropriate for you?
You know best what you need in terms of capital preservation, how much and when you will need income from your investments, liquidity, ability to pass on to heirs, etc. If the individual is not asking you about those needs, you need to ask those questions. Make certain you understand the answers and preferably have them in writing. Verbal promises and assurances are not enforceable in court.

If the investment does not work out as anticipated, what is the individual’s exit plan? 
Will they strive to protect your investment or are you on your own once you invest?

How much will it cost to implement the new adviser’s solution?
If you are required to liquidate assets, what costs will be incurred liquidating those assets?

This is particularly important when liquidating insurance products. Has the new adviser given any consideration to capturing dividends prior to selling assets?  What will it cost to purchase recommended investments?  Will those investments be liquid or will you have to commit to a holding period?
And then, ask yourself why you are considering the new adviser.
If you are dissatisfied with some aspect of our services, we would like an opportunity to talk to you about the issue before you make any changes.  If your answer is because you like the individual, you want to help them out or you feel pressured to make the change by the individual or another adviser, step back and give yourself time to reconsider your decision.

Your first priority should be the safety and profitability of your assets. There will always be another opportunity to invest in the next greatest thing as long as you have not lost your assets on a poor decision. 

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC

Follow us on Facebook at and on Twitter @Paul_Schatz

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