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:
Don’t just accept the adviser’s word. Verify.
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.
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?
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.