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Questions You Should Ask Before Choosing an Advisor Flipbook PDF
Questions You Should Ask Before Choosing an Advisor - Cramer & Rauchegger, Inc.
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QUESTIONS YOU SHOULD ASK BEFORE CHOOSING AN ADVISOR
WITH A LITTLE HOMEWORK, YOU CAN FIND THE RIGHT FINANCIAL ADVISOR FOR YOU Have you ever had to hire someone in an area that was not in your comfort zone or area of expertise? It can be a scary feeling because you may not have all of the pertinent information at your disposal to make an informed decision. A few years ago, I (Tom) needed repair work done on my house that involved a leaking roof and a damaged window that, if not properly repaired, could have caused wall damage and ultimately mold in the house. Because I am hardly an expert when it comes to roofing, window repair or construction in general, I looked for a skilled professional I could trust to do the repairs at a fair cost. After all, our home is one of our most important assets, and improper maintenance can lead to other future problems. So how did I find a trustworthy and competent professional? By doing a little homework and asking the right questions. Wouldn’t it be great if we always knew the right questions to ask when faced with an important decision or seeking advice from someone who has knowledge, experience and expertise? Choosing the right financial advisor to help you manage your money to meet your long-term financial goals is one of the most important decisions you will ever make. Not only will you be sharing your personal information with a virtual stranger, but you also will trust them to always act in your best interest with your money, your financial future and the well-being of your family. As an independent financial advisory team, we have compiled a list of important questions that you should ask when choosing the right financial advisor to act as a trusted financial partner for you and your family. We hope this information helps you find the right financial advisor or firm that is the perfect fit for you and your family. Sincerely,
Tom Rauchegger Founder
R. Scott Cramer Founder
15 QUESTIONS YOU SHOULD ASK BEFORE CHOOSING AN ADVISOR
1. HOW LONG HAVE YOU BEEN AN ADVISOR? The knowledge and experience of an advisor who has weathered both good and bad markets will be an asset to your long-term financial health. At the least, it’s preferable that the financial advisor has successfully managed through the technology stock bust of the early 2000s and the financial collapse of 2008. 2. IN WHAT AREAS DO YOU SPECIALIZE? Some advisors work with all ages of clients, and some specialize in people who are retired or close to retirement. If you are close to or in retirement, you may want to seek an advisor who specializes in these areas and specifically serves these types of clients. 3. ARE YOU A FIDUCIARY? Fiduciaries are held to a high legal duty and ethical standards because they have the responsibility of making financial decisions on behalf of the client or principal. They must hold the clients’ interests above their own. A fiduciary must provide full disclosure regarding fees, compensation and any conflicts of interest. If given a choice, you will want to work with a fiduciary. 4. ARE YOU A REGISTERED INVESTMENT ADVISER (RIA) OR AN INVESTMENT ADVISER REPRESENTATIVE (IAR)? An Investment Advisor Representative (IAR) is legally bound to make investment recommendations that are suitable for the client. A Registered Investment Adviser (RIA) not only has to make suitable investment recommendations for the client, but as a Fiduciary must also make investment recommendations that are in the clients’ best interest (before their own). 5. DO YOU HAVE AN OFFICE? You want to look for an advisor who has an office that you can go to and visit. You do not want someone who works out of the back of their car, and may not want an advisor who does not have a dedicated office or support staff to serve you. 6. HOW MANY PEOPLE ARE ON YOUR TEAM? Let’s face it. One person cannot do everything. Your financial advisor cannot answer the phones, put in supply orders, sign for packages, hold consultations and manage your money all at the same time efficiently and effectively. Ideally, you want your advisor to have a staff who can manage the office while the advisor focuses on advising you on your money so you can reach your financial goals.
7. DO YOU HAVE A SALES MANAGER? Many brokers that work for large financial brokerage firms report to sales managers. Many times sales managers will dictate to the broker which funds or investments they should recommend to their clients. Whether the investment product is the best for the client runs a distant second. Do you potentially want a sales manager telling your financial advisor what investments to recommend for you? An independent financial advisor will work for you and not for a sales manager. 8. DOES YOUR FIRM HAVE PROPRIETARY PRODUCTS? This means the firm makes, recommends and sells their own investment products. This would allow them to make money more than one way. Proprietary products allow the advisor and firm to make money on the investment product itself and charge a fee or commission on the actual sale of the product. If you are working with a large brokerage firm advisor, be sure to carefully review these types of investments if they are recommended to you against other potential solutions before you decide to buy. 9. WHAT PROFESSIONAL LICENSES DO YOU CURRENTLY HOLD? The licenses the advisor holds determine what can be sold. If your advisor holds only an insurance license, then insurance products such as annuities, life insurance and long-term care insurance will be the only solutions suggested for all of your financial problems. This individual is considered an insurance agent only, and is not a true “advisor”. If your advisor holds only a securities license, then stocks, bonds and other securities will be the only recommended solutions for you. This individual is considered an investment broker only, and is also not a true “advisor”. Working with an advisor who holds both securities and insurance licenses and who is also registered to provide you with financial planning services may be in your best interest because this individual is considered a true financial advisor, and can offer you a much broader array of solutions to help meet your goals. 10. HAVE YOU EVER BEEN DISCIPLINED, SANCTIONED OR FINED BY ANY REGULATORY BODY? You want to make sure the company or person you are selecting to be your financial advisor doesn’t have a number of complaints against them. How can you check on something like that? Go to the Better Business Bureau to search the company name and see if there are any complaints against the company. Another great resource is www. finra.org. You can go to the site and type in the broker’s name in the “Broker Check” area. You will find out whether the advisor has ever been disciplined, sanctioned or fined. 11. WHAT IS YOUR INVESTMENT PHILOSOPHY? Some investment strategies are based solely on the stock market, solely on insurance products, or perhaps a combination of the two. Alternatively, some investment philosophies are geared more towards growth than income or capital preservation. Make sure the planner’s investment approach is a good fit and in alignment with your risk preference to reach your goals.
12. HOW DO YOU EVALUATE THE INVESTMENTS YOU RECOMMEND? How does the individual or company select where your money should be invested? What kind of research is done to insure that they are investing your money not only wisely, but to a legitimate company? Do they go and visit the companies they want to invest in to see how their business is run and meet with management? Do they do their due diligence? Have they personally invested in the same investments they are recommending for you? 13. HOW DO I KNOW I CAN TRUST YOU (OR ANYONE ELSE)? It is always helpful if you are referred by someone who has had a relationship with the advisor. Clearly, that does not protect you from the Bernie Madoff’s of the world, but it can help weed out some of the “bad apples”. You can also protect yourself by ensuring that your money is held by a third party custodian, bank, or Trust company. The advisor should not have access to your money nor do you ever want to make out a check directly to the advisor or Advisory Firm. 14. HOW DO YOU GET PAID AS AN ADVISOR? There are really two different ways an advisor should or could get paid…commission based or fee based. Many advisors depending on the type of investments recommended getting paid via a combination of these two methods. It is important that you get full disclosure of all of the fees in advance so you are not surprised later. It is also important to ask the advisor if all of your money is going to work for you or if some of it is going to pay them upfront. For example, if you are investing in mutual funds, you may want to consider no-load “C Shares” (which have no commission or early withdrawal penalty on your investments) as opposed to front-loaded “A Shares” (you are paying commission upfront when you invest your money) or back-loaded “B shares” (you pay a penalty if you withdraw your money prior to a specific time period such as six years). Assuming these are suitable for you, this will ensure that all your money is going to work for you. Owners of “C shares” have flexibility to make changes without paying a penalty and the advisor’s interest is aligned with yours. 15. DO YOU HAVE A BUSINESS CONTINUITY PLAN? IF SO, WHAT IS IT? What happens to my investments if the advisor were to unexpectedly die, leave the business or get fired from the advisory Firm? Is there another advisor at the Firm that is familiar with your situation and can help you with the transition? The right advisor or advisory team will have a business continuity plan in place for all of these scenarios so your investments continue undisturbed, you will have access to move to another advisor or Firm (if necessary), and you continue to receive service on the investment accounts.
WWW.CRAMERANDRAUCHEGGER.COM This material is provided courtesy of Cramer & Rauchegger, Inc. and contains general information to help you understand basic financial planning strategies. It refers to legal and tax consideration but is not meant to provide advice in this regard. Legal and tax advice should come from an attorney or tax advisor such as an accountant. The presenter of this information as well as the information itself is not related to, endorsed by, nor connected with and not approved by any government agency or organization.
Securities offered through Kalos Capital, Inc., located at 11525 Park Woods Circle, Alpharetta GA, 30005, (678) 356-1100. Investment Advisory Services offered through Cramer and Rauchegger, Inc. Cramer and Rauchegger, Inc. is not an affiliate or subsidiary of Kalos Capital, Inc.
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