Saturday, August 29, 2015

6 Steps to Finding An Investment Advisor Who Works For You

Once a person has decided that they need some help with investment management (see our earlier post Why Hire an Investment Advisor, and Do I Really Need One), the next step is the search process to find a good investment advisor. We have broken the process down into six steps:

1) Find a fiduciary: A Fiduciary is a person legally obligated to put your interests ahead of their own. Doctors are fiduciaries. Attorneys are fiduciaries. For some reason, stock brokers are not fiduciaries...they are able to avoid the higher legal standard of fiduciary. However, Registered Investment Advisors are fiduciaries. Check the website of the group you are considering. If, at the bottom of the website you see (usually in very small print) that says "Securities offered by XYZ corporation" or "Member of FINRA/SIPC" etc...then you are looking at a stock broker, not a fiduciary. Also, just ask the person you are considering hiring. It's an easy question and an easy answer. Start by Googling "Registered Investment Advisors."

2) Check out the Investment Advisors legal history. The SEC offers a wonderful site called "Investment Advisor Search" which offers the ability to search by a person's name or company. If the person isn't listed there, he or she is not an investment advisor.

3) Make a phone call or appointment once you have found some fiduciary Registered Investment Advisors, and ask about their years in the business, their investment philosophy, their relationship minimums, and what sort of fee structure they offer.

4) If possible, schedule a face to face interview with your potential Registered Investment Advisor. Personality fit and trust is an important component to the relationship and you want to see what sort of chemistry you have. Bring your spouse or partner.

5) Ask where the Registered Investment Advisor custodies your assets. Stocks, bonds, and mutual funds must be kept somewhere. The most popular custodians are Charles Schwab and Fidelity.

6) Ask the Registered Investment Advisor about how they would work with you and whether they have clients similar to you. If you are a retiree, does this Registered Investment Advisor work with other retirees? Make sure your situation is similar to their typical client situation.

Once you have decided upon someone to hire, the process is quite simple. Usually, your assets transfer to the new custodian and your new advisor begins to go to work immediately.




1 comment:

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