Selecting a good financial adviser is critical to long term success and ensuring a well deserved retirement after working many years. The problem is knowing what questions to ask and whom to trust.
Many investors trusted Bernie Madoff until the greatest ponzi scheme in American History completely revealed itself. Today with the stock market in shambles many of us have left our old financial advisers or fund managers in the dust to either open our own discount broker account or find new help.
While there are no guarantees you will find the perfect adviser being extra cautious and conducting your own due diligence is critical. We have to remember that our family’s financial security is at stake not too mention our sanity.
Next time you are looking for a new financial adviser, fund manager, etc. make sure to keep these key questions in mind (from Yahoo Finance and shortened for length):
- What is the adviser’s background?
- What do the adviser’s clients (new and old) say? Don’t wholly depend on the reputation of a big firm or recommendations from friends, family or members of your country club.
- How does the adviser get paid? Ask advisers to detail exactly how they work and the total compensation picture from managing your portfolio. Be wary of anyone who shies away from answering these questions in a transparent way.
- What are the adviser’s checks and balances? When purchasing investments, make sure you are writing checks to a third-party custodian, like Fidelity Investments Co. or Charles Schwab & Co., not to your financial adviser directly.
- What is the adviser’s track record? Remember to ask about both short-term (one year) and long-term (10 years or more) records, and ask if your adviser is using absolute returns or returns relative to the performance of the market.
- Can the adviser put it in writing? Ask for a formal written outline of the services the adviser will be providing and what fees you will be paying.
- What do other pros think? Know the basics behind your investments, insurance, estate planning and taxes, and then turn to other experts for confirmation.
Leave no questions un-answered and have 100% confidence in your financial adviser handling your nest egg. Don’t be instantly fooled by offers of amazing returns and promises of a financially free future. Slow and steady wins the race.
Seven Questions to Ask When Picking a Financial Adviser
Shelly Banjo, Wall Street Journal
Yahoo Finance, Monday, April 13, 2009