Sometimes you know it is time for a change, and the time has come to move on from your registered investment advisor. Some top reasons people break up with their investment advisors are stagnant advice, strained communication, or inferior performance.
Asking friends and family for referrals is a great first step when you are ready to shop for a new advisor. Another crucial step is to list the reasons why you are looking. Knowing what you didn’t like about your prior experience will prevent you from recreating that again.
Once you have narrowed down your list of candidates, set up a time to interview each one. The time you spend vetting and asking questions will get you closer to finding a financial advisor who offers the products and services you desire. Not sure what you are looking for? Here are a few questions to get you started.
1. Compensation- How are you paid?
Look for dollars, not percentages. There should be full disclosure on account fees, fund expenses, and taxes.
2. Registrations- Are you a fiduciary?
There is a difference between an advisor who is a broker paid commissions or a fiduciary who must act in their client's best interest. They are paid differently. Some are registered as an RIA (Registered Investment Advisor) or dually registered as an RIA with a Broker/Dealer. Be sure to ask why they are dually registered.
3. Philosophy- What type of risk-management philosophy do you have?
Look for an intelligent summary of how they navigate markets, especially when the outlook is volatile.
Pro tip: ask for case studies from clients who match your investment profile and age.
4. References- How long have you been in the investment business?
Ask for references from existing clients. Ask how they fared during previous bear markets. Get the history and find out how they would do things differently now.
5. Complaints - Do you have any disclosures?
If the advisor is registered with FINRA, you can go to FINRA.org and use the brokercheck database to find out. You can also visit the investment advisor's website to review the advisor's ADV parts 1 and 2. It will offer information on the advisor and their firm.
6. Custody - Who has control of your client's investments?
Look for an advisor who uses a 3rd party custodian like a large bank or brokerage firm. Advisors who take custody of clients' assets are red flags and could have more potential for fraud.
7. Diversity - What asset allocation do you use?
The three main asset classes are equities, fixed income, and cash and equivalents. Each will behave differently over time due to various levels of risk and return. Learn more about VGA's strategies.
8. Uniqueness- What edge do you have over other firms? What sets you apart?
Many advisors find a niche, working with a particular type of investor or even within a professional field. Find out what makes them especially well-suited to you.
9. Communication- How will we work together?
Find out how often you will hear from your advisor and whether it will be personal calls, emails, or via newsletter. Ask for the type of communication you need to feel valued as a customer.
10. Extras- Will the extras cost me extra?
Find out what other services might be included. This might be a financial plan, tax returns, estate planning, social security, or insurance work. Ask if those services are outsourced.
Don't shy away from firms that outsource! Many services can come with a deep discount due to trusted partners. Firms that outsource can stay focused on their core strengths while offering extras for less.
Finding a new investment advisor can be a successful experience when you've made the proper preparations. Learn more about Vineyard Global Advisors' long-term investment strategies.
