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Interviewing a Financial Advisor
#1
Here are some questions that you might use to interview a financial adviser:

1. Are you registered as an investment adviser? If yes, then the adviser owes you a fiduciary duty, which is a fancy way of saying that he/she must put your needs first. If the adviser is registered, ask for a copy of the Form-ADV and Form-ADV part II.


2. How do you charge for your services, and how much? The three basic methods of payment are: Fees based on an hourly or flat rate; fees based on a percentage of your portfolio value, often called "Assets Under Management" ("AUM"); and commissions paid per transaction.

3. What licenses, credentials or other certifications do you have? Licenses or designations, such as a Certified Financial Planner (CFP), a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). While these are signals of credibility, they don't guarantee a successful relationship.

4. What services do you or your firm provide? Some offer advice on a range of topics, but do not sell financial products. Others may provide advice only in specific areas such as estate planning or tax matters.  Implicit in this question is also what assistance the adviser will not give you. Some people are just investment advisers and only provide you advice on your investments, while other people do comprehensive financial planning around retirement, insurance, estate planning and tax planning. Go with someone whose offerings suit your needs.

5. What types of clients do you specialize in? Some financial advisers have a niche, and if you have a specific interest — such as charitable giving or socially responsible investments or if you’re a newlywed or recently divorced — you’ll want to find one that concentrates in these areas too.

6. What is your approach to financial planning and investing?  If you have a strong preference for a particular philosophy, ask the adviser what his or hers is. For instance, if you prefer to use low-cost funds, you can ask whether they plan to used actively managed funds or passive investments. Some advisers prefer to develop a holistic plan that brings together all of your financial goals. Others provide advice on specific areas, as needed. Make sure the adviser's viewpoint on investing is neither too cautious nor overly aggressive for your risk tolerance. Also ask whether the planner makes their own investment decisions, or depends on others in the firm to do so. What was the adviser's performance in both good and bad markets and ask yourself whether it's more important to you to make money in a rising market or prevent losses in a down market. A great follow up question: What were the three worst investment decisions you made over the past five years, and how did you correct them?

7. How often will we interact? What should you expect in terms of frequency of verbal, written and in-person communication? Also ask whether the adviser will remain your primary contact. Some of planners hold an initial planning meeting and then you see them once a year, and that’s all you get. Others might have quarterly check-ins. Some clients just want to go over everything once a year and then they’re good. Others are looking for more support, so it depends on the amount you want to pay, and how involved you want your planner to be. Are you a delegator? Or do you expect your adviser to explain things to you? If you’re not sure of what you’ll be comfortable with, the J.D. Power & Associates survey found that investors contacted 12 or more times a year had the highest rates of satisfaction with their advisers.

8. Will I be working only with you or with a team? This question will also help you see how often you’ll be in touch with your adviser. Some will meet with you once a year, but have an assisant reach out to you regularly, Some companies have a team approach rather than an individual approach. One approach is not necessarily better than the other. It’s really whatever you prefer.


9. What makes your client experience unique? Why do I want to work with you? Some advisers may want to treat you to their financially savvy best friend and explain that their focus is on using your money to match your values. This pitch would appeal to some clients, but not ones who, for instance, are out to maximize returns in the market.

10. Can you provide three references? Ask for two current clients whose goals and finances match your own, as well as a professional reference, like an accountant or estate attorney

11. Do you have a financial interest in the entity that would house my account?  This is your Madoff-prevention question. When interviewing advisers not associated with large brokerage or insurance companies, ask if they use an independent third-party custodian or clearing firm (this is the entity that produces your statements), which prevents the adviser from having direct custody of your assets and adds another level of security for your account. In the Madoff example, he was the investment adviser, broker-dealer, clearing agent and custodian for all of his client accounts -- a big red flag.

12. Could I see a sample financial plan? There is no one set structure for a financial plan, which means there is wide variation. Some people might give you 50 pages of stuff you don’t understand like charts and graphs, and another planner might provide a five-page snapshot of your financial situation. With a sample, you can say, ‘I really want that in-depth analysis,’ or ‘I don’t understand that.’

13.  Is there anything in your regulatory record that I should know about? Part of your research should include conducting background checks on the professional you may hire. You can visit the Securities & Exchange Commission (http://www.sec.gov/) and FINRA (http://www.finra.org/Investors/ToolsCalc...okerCheck/) websites or the State Securities website NASAA (http://nasaa.org/)  as well as the CFP Board (http://www.cfp.net/). While some violations are non-starters (settlement of multiple customer complaints), others may be understandable (marketing materials not pre-approved; non-client or investment violations).

14. Have you ever been convicted of a crime?

15. Has any regulatory body or investment-industry group ever put you under investigation, even if you weren’t found guilty or responsible?

16. You can check this website (http://www.cfp.net/learn/disciplineactions.asp) to see if the adviser is a CPF and see if there are any disciplinary actions on them.

17. Do you have experience working with tax exempt organizations? This question is only relevant if you have non-profit organization.

18. What is the amount of funds under management of your wealthiest client? You probably want someone who advises people with more money than you have.

19. What experience do you have in advising both capital investments and passive business income? If you are interested in investing in passive business income such as REITs, rental units, or storage units, then you want an adviser with experience in these areas.

20. Are you a full time adviser?

21. How many years have you been an adviser?

22. Would you personally handle my portfolio?

23. How much time do you spend monitoring investments & talking to existing clients? Expect an answer of at least 8 hrs per day.

24. At the end of your meeting, ask yourself the most important gut check question: Do I like this person? After all, you are about to enter into an intimate relationship that will hopefully last a long time. If you have any reservations, move on. There are plenty of qualified advisers out there, who would like to help you out.

25. Did he/she ask me questions and seem to be interested in me? Notice if the adviser talked 90% of the time. If it’s more like 60/40 and he has asked you how he/she can help you, that’s really important. Financial planning is about looking at the person’s individual circumstance instead of punching in some numbers — it’s based on the client’s goals, financial background, what they believe about money, etc.

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#2
Very helpful. I'll be using this. Thank you very much. Jan McC
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#3
These are very useful tips that can help to find a right financial adviser. Thanks a lot for this informative share. I too want to invest in share market and was thinking to consult a registered wealth management group Las Vegas. Truly these tips will be extremely useful.
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