What should I know when selecting a financial advisor?


February, 2011 |

“Ninety percent of investors are not confident in their investment plan.”– Kevin Burns

How does an investor know whom to trust? According to a 2009 Forbes.com survey1, only 26 percent of responders believe that Wall Streeters are honest.  How can you find an advisor you are confident is trustworthy? Ask the following about your current or potential advisor:

1. Is the firm a registered independent advisor or stockbroker?  As fiduciaries, registered independent advisors are legally responsible for putting clients’ interests before their own.  A brokerage firm’s responsibility is to make sure the investments chosen are suitable for its client.  A fiduciary is required to disclose all material conflicts of interest to the client (any recommendation to a client that in turn is financially rewarding for the advisor).

2. Do the advisors have a clearly defined planning process?
It is not possible to predict what the markets will do short term, so your advisors should have a clearly defined planning process. This helps to ensure that your risk and asset allocation are based on family goals, not market performance.  Planning, rebalancing and asset allocation are key to long-term success.

3. Do your advisors offer complete and total transparency?
Be certain that you have a complete understanding of how you are invested and why, how much you are paying in fees, and how your investments are performing against preset bench- marks. Full access to your accounts and financial status at all times is of paramount importance.

4.  Do the advisors get their income from fees?  Be wary of advisors who have undis- closed conflicts of interest. Are they making their money by selling you a particular product? If so, the product might not be the best one for you, but the one that will benefit the firm and ultimately the advisors.

Are they charging you on the cash you hold with them? Advisors who do not make money on cash may be less likely to suggest you hold an appropri- ate amount of cash for your financial needs because they do not personally benefit from it. Advisors who work on a fee-based structure, built around assets under management, can focus on your risk allocation and long- and short-term goals.

Ask specific questions regarding the fees you are charged. The structure of your investments may have hidden fees. For example, often if you buy a bond for “no fee,” you are paying a sizable spread between the bid and offer prices of that bond. Also many no-load mutual funds have significant expense ratios and often have marketing expenses that are not detailed without asking.

5.  Do the financial advisors offer the best in client services? While the advisors themselves are a big part of your decision, the back office staff is just as important. You want to make sure the office as a whole knows you, your family and the issues that are important to you. Making sure the supporting team is just as strong and experienced as the financial advisors will make everyday requests smoother and response time faster.

6.  Are the advisors capable of working with multiple large, strong, world-class custodians?  Knowing who has custody of your investments is a must. You should always ask, “Who do you use as a custodian?” Then take the time to research and get to know the custodian. Make sure it has strong leadership in the banking industry and is committed to the highest standards of excellence when it comes to the security of your assets and information.

You want to make sure you are creating long-lasting relationships with the best of the best!

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Kevin Burns

Kevin is one of four founding partners of Coastal Bridge Advisors with over 30 years’ experience in the financial services industry. He is responsible for leading the firm’s client acquisition efforts as well as managing Coastal Bridge Advisors’ West Coast activities. Kevin is committed to building long-term relationships and helping individuals and their families achieve …

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Coastal Bridge Advisors has been named the Best Private Wealth Manager Under $5B by Private Asset Management

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