So you’ve decided to hire a financial professional to help you navigate your future. You’ve talked to friends and family members, and while you trust their recommendations, putting your financial future into the hands of someone else is a very big deal. You need to do your own due diligence, but where do you start? Not all financial firms/advisors are created equal. And with all the options available to us, many people decide to go it alone out of fear. They fear they could be hiring the next Bernie Madoff, or that they might end up being a number in a long list of clients. The task can seem so daunting that it’s often easier to hire the first advisor you meet, or do nothing at all.
It’s a big decision and many don’t know what questions to ask and what to look for. The below can help provide anyone looking to hire a financial professional a place to start. The questions are not meant to sway anyone in a certain direction, but rather to help ensure you hire someone you feel comfortable with and confident in.
Understand how the advisor is compensated.
Find out exactly how your advisor is paid and make sure you understand any fees and charges – and have them in writing – before making any final decisions. Fee-only means the advisor does NOT earn any commission, while fee-based advisors can earn commissions.
I believe fee-only advisors are best. I formed this belief working for firms that were fee-based and fee-only, and witnessed the practices at each. Fee-only advisors do their best to align their interests with their clients. They don’t make money off the investments they recommend. In a fee-only structure, anything that comes out of your bottom line in turn comes out of the advisor’s bottom line. Therefore, it’s in the advisor’s best interest to only recommend investments they truly believe are in your best interest.
Fee-based advisors might have incentives to sell certain products. (Have you ever heard: “If you want to buy your financial advisor a new Mercedes, buy an annuity?”) Fee-based advisors can fall prey more easily to their clients’ views and emotions, especially during volatile markets. You want to make sure you are hiring someone that will give you the best advice, even if it isn’t what you want to hear. “The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffet. You don’t want a “Yes” man. (more…)
There is a long-running joke in the financial services industry that when a client opens an account, a tree is sacrificed in their honor. Unfortunately, there is a lot of truth in that statement. Both Charles Schwab and Fidelity are required to provide you with important disclosure information in addition to your regular monthly account and transaction confirmation statements. All of these reports are designed to help provide you with important and easy ways to review your portfolio.
Fortunately, you may choose to receive this information electronically. We encourage our clients to sign up for electronic delivery of monthly statements, trade confirmations and fund materials, such as prospectuses and annual reports. This will save you time and energy when going through your mail. If you need assistance with setting up any of these features, please do not hesitate to call your advisor or client services representative.
Additionally, Charles Schwab and Fidelity have provided us with the following feature guides to better help you understand your custodial account statements. If you have any questions, please call our office at 1-800-423-4893.