Questions to Ask When Hiring an Investment Advisor
Who you hire to manage your money is one of the most important decisions you'll make in your life, so take it seriously. We recommend you interview more than one advisor, and listen to your gut. Below are some interview questions you may consider asking when interviewing a potential advisor. We’ve also included some guidance on what sort of answers to listen for.
Is your firm subject to government regulation; by what agency?
Without exception, any firm you work with needs to be subject to a regulatory regime either a government agency or an established regulatory institution.
Are my investments held in insured accounts?
The UK has the Financial Services Compensation Scheme (FSCS) while the US has the Securities Investor Protection Corporation (SIPC). These are just two examples of coverage offered investors by established government sponsored organizations.
How long have you been a financial advisor?
Receiving guidance from an advisor with the knowledge and the convictions drawn from actual experience of various market and economic cycles has significant value.
What makes you a good financial advisor?
A successful advisor must always serve as an advocate for his or her clients; focusing every attention on the clients’ best interests.
What is your educational background and what licenses, credentials, and other certifications do you have?
University undergraduate and graduate degrees in related fields such as finance, economics, and accounting provide professionals with a very good academic knowledge base.
There are numerous licenses that investment professionals are required to obtain before they can engage in dealing with the public. Be sure that the person you are talking with holds a license form a legitimate government regulatory or self-regulatory agency.
One license to look for is Registered Investment Advisor (RIA). An RIA has a legal and fiduciary obligation to their clients, as mandated by the Securities Exchange Commission (SEC) and the United States Investment Advisers Act of 1940.
Other advanced professional credentials include Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and Certified Financial Planner (CFP).
Have you ever been disciplined by any regulatory agency during your career?
The answer to this question needs to be an obvious, NO.
What type of client do you specialize in?
If you have unique circumstances, you should seek an advisor that specializes in working with clients with situations similar to your own.
What services do you and your firm offer?
Some firms offer only investment management, while others are more holistic wealth advisory firms. Additionally, some firms may offer family office services.
Do you create a written financial plan, and if so is there a cost?
How do you charge your clients (commission, fee-based on the assets under management, fee only, or a combination)?
We prefer advisors whose compensation is based on a percentage fee of the assets under advisement, as it ties their success to yours.
How many clients do you have and how much money do you manage?
This may seem like a long list. It is -- and it should be. Again, this is a serious interview you're conducting. Hiring a good financial advisor can change your life -- and hiring the wrong one can also change your life (just not in the way you want).
For more detailed information on choosing a financial advisor, please see one of the following reports: What Every Investor Should Know, by the CFA Institute, the professional association behind the Chartered Financial Analyst (CFA) designation, and Cutting Through the Confusion, by the Coalition on Investor Education.
Source: Maxim Global Wealth Advisors, By Andrew Fisher, CFA, CPA – 2010
General Guidelines and Administration
