by Kurt Mears, Financial Adviser and Smartvestor Pro
Investing and financial planning are anything but easy. That’s why we recommend you work with a financial professional. You may save time, money and a whole lot of stress, and your professional will encourage you to invest and plan for the long term.
Since this person will be so important to your financial life, feel free to be picky. We’ve put together a short list of questions to get you started in your first meeting with a potential financial adviser.
1. What type of experience do you have?
The financial industry does not impose regulations on investing professionals in terms of experience, so you’ll need to pay attention to this answer. You want a seasoned professional, someone who has seen the ups and downs of the market, and someone with experience in financial planning and retirement planning. Experience in banking or as a CPA is not the same.
Advance Capital Management, as an example, has helped thousands of people manage their financial lives for more than 30 years. We specialize in personalized financial and retirement planning and investment management services. Most of our advisers have earned industry designations such as CERTIFIED FINANCIAL PLANNER™ and Chartered Retirement Planning Counselor.
2. What’s your overall planning and investing philosophy?
You want a professional who creates personalized financial plans and who believes in investing for the long-term, diversification and mutual funds with a long history of success. A professional who hands out cookie-cutter advice or who recommends a portfolio of single stocks or other risky investments isn’t a good fit. That type of professional operates in a world where bottom lines and performance chasing matters most – not the person who needs help.
We’ve found that advisers are better able to improve people’s financial lives through prudent, personalized financial planning and investment management. That way, the interests of the client come first.
The most important thing to remember is that your professional does not make decisions for you. You should feel comfortable that this person guides you on how to make smart decisions that are focused on your needs and goals.
3. How are you paid?
There are a wide variety of ways a financial professional can be paid. What you’re looking for is an honest answer. Your adviser should be willing to explain all fees and expenses associated with the services and investments he or she recommends. Don’t settle for anything less.
Some advisers will charge commissions for the investments they sell, with no obligation to sell only products that are right for you. Other advisers, like Advance Capital, are fiduciaries, where our obligation is to provide investment advice and recommendations that are always in your best interests regardless of fees.
Further, some advisers are fee-only advisers. They charge a flat fee, an hourly rate or a percentage of assets.
We charge a small percentage of your assets. Our fee is 1% or less based on the size of your assets, and it includes both financial planning and investment management services. For a $500,000 investment portfolio, for example, our management fee would be 0.90%. Compare that to the average industry fee of 1.05%, according to AdvisoryHQ.com. That’s a potential savings of $750 per year. According to Investopedia, the average fee charged by major brokerage firms is 1.42%, which translates to a savings of $2,600 per year with Advance Capital.
Hiring a financial adviser is a wise decision. But don’t stop there. Make sure you’re comfortable with your adviser’s qualifications, philosophy and payment arrangements.