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Top Five Questions to Ask When Hiring an Advisor

Question #1:  Do you and your firm emphasize obtaining credentials for members of your client service teams?

In general, firms that are staffed by certified financial planners (CFP®'s), certified public accountants (CPA's and PFS's) provide additional deep investment analysis and bring estate planning and income tax planning expertise to the advisory relationship. It is important that you match your needs with these different areas of expertise. For example, if you are a small business owner you may benefit by establishing a relationship with an advisor who has a CPA background to assist with business and tax planning, whereas if you are an investor contemplating retirement you may best be served by an individual who has a CFP® background who can help you prepare a financial plan transitioning from your working years to your retirement years. The best firms have several credentialed staff members with different areas of expertise as part of their team to assist you with your needs.

Question #2:  How are you paid?

You need to ask if there is a planning fee, hourly fee or whether the advisor charges as a percentage of assets under management, lastly ask if they will make any money from selling any specific investment product.

A broker might receive a commission in exchange for selling an investment or investment product. This arrangement may or may not be the best for you; however, a financial advisor acting as a fiduciary must place the client's interests ahead of their own and must disclose what their fees are, how they are compensated and any other conflicts.

Question #3:  What is your average client size in terms of assets under management or do you have a certain customer niche you serve?

It is important to understand what type of clients the advisor is most comfortable with. How better to gain this knowledge than to grasp the size of the current relationships and the type of clients being served? For example, does the advisor work with ultra high net worth families with complex family and estate planning needs, or does the advisor work primarily with executives employed at Fortune 500 companies?

Question #4:  Another valuable question may be in the area of sample financial documents; for example it would be helpful to look at a sample quarterly performance report, sample financial plan or a sample proposal recently provided by the advisor to a prospect with similar needs.

Many times reviewing sample documents and reports from a firm will give you a flavor of areas of emphasis or how they may function in the future. This may give you an idea as to what type of investment philosophy the firm maintains when you can actually see sample performance reports that are populated with the types of investment managers or funds the advisor uses; in addition, the sample proposal will tell you the firms current thinking and the investment asset allocation currently utilized.

Question #5:  It is also important to ask what the client relationship may look like once the relationship is established.

The following questions may be helpful in this regard in order to determine what an ongoing relationship may be with this advisor or firm.

Questions such as, how frequently will I meet with you on an annual basis going forward? Will there be quarterly reports provided whether we meet or not? Will I be working with a team of professionals or will I be working with one advisor?

These are all questions designed to give you an idea what the client experience may be going forward and to determine if you will have the opportunity to benefit from a meaningful, substantial relationship with an advisor or whether you are really buying an upfront portfolio allocation that has very little follow up and ongoing substance to it. In other words, are you entering into a long term, in depth relationship with this advisor or are you purchasing a model allocation and hiring a “set it and forget it” advisor?

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