Selecting a new wealth management firm for your investment accounts can be stressful. Following are some very specific questions you should ask of any new advisor you are considering hiring. The advisor should be able to answer these questions without advance notice. You might want to copy and paste these questions into your own document for reference purposes.
Questions about the Advisor’s Services and Business Structure:
- Besides access to investments, what services do you provide? (E.g. Financial Planning, Tax and Retirement Planning, Collaboration with Accountant and/or Estate Planning Lawyer, Life and Health Insurance Services, Parent Care & Health Planning, etc.)
- How many client families do you currently serve?
- What’s the maximum number of client families you will work with?
- How many people do you have in your team? What’s your business’s succession plan?
- If we become clients, how often would we meet in person, conference call, etc.?
- What are your professional designations and experience?
- Where do most of your new clients come from? Referrals from related bank branches, referrals from clients, content-based marketing?
- How are you paid? Commissions, hourly fee, or fee-based?
- If commissions, how much (%) and how long does that keep me in those investments?
- If fee-based, what are your fees and how do they scale down as the size of our portfolio grows or we bring over new money?
- What are your minimum investment amounts for a new client family?
- What specific attributes of your advisory business differentiate you from competitors? How exactly do these differences benefit me? Please be specific.
- Are you free to share your own original ideas or research, or those from independent research sources?
How would your friends and clients describe you re: being more of a mainstream thinker and advisor, versus being an independent thinker and innovator?
- Are you familiar with Martin Armstrong? Please share your views on his work, etc.
- What are your views on the safety and investment potential of long term govt. bonds?
- How are my accounts protected from theft or fraud?
Questions about the Advisor’s Firm:
- Does your firm have investment banking operations (aka corporate financing relationships) with any public securities issuers?
- If yes, please explain exactly how we are protected from conflicts of interest created by these investment banking relationships. Are any of these securities issuers represented in any of your portfolios?
- Does your firm have proprietary investment platforms like mutual funds or separately managed accounts?
- If yes, what % of your clients’ investments are in these proprietary investment choices? If over 10-15%, why such a high %? Are there any incentives (financial, recognition, educational) for recommending proprietary investments? Do you own shares of the company?
- If yes, how does this affect your objectivity in respect of your firm’s proprietary investment offerings?
- What pressures do you have from branch or senior managers in respect of your average revenue per client?
Questions about the Investment Managers the Advisor Recommends for Clients:
- Are your investment managers Fiduciaries? Would our accounts be considered to be under Fiduciary Care, or is our risk framed by industry “Suitability Requirements?”
- Given the low interest rate environment, what specific strategies and investments do your managers use to increase yield in the non-equity portion of our portfolio, without taking on unnecessary capital risk?
- Do your managers typically hold more than 40 stocks in their core equity portfolios?
- How free are your managers to make significant adjustments to country, asset class and sector allocations in order to take protect and grow our capital…or are they restricted in terms of the changes they can make?
- How do your managers deal with risk and reward in the currency markets?
- Do your managers actively use option overlay strategies in your equity portfolios?
- What are the risk management parameters in place on the securities your managers select, or is it more buy and hold?
- Can you please provide a summary of your clients’ investment performance?
- How much flexibility is there for your portfolio managers to make higher allocations to high growth sectors such as precious metals, energy, technology, etc.?
- Do your Portfolio Managers use independent research sources, or only those from the firm’s research department?
- Are your Portfolio Managers familiar with Martin Armstrong’s Socrates/ECM™ system? Are they both willing and able to incorporate Socrates™ into how they manage my portfolio?
- How often do you (the advisor) communicate directly with the people who make the day to day investment decisions for our portfolio? Can I speak directly with the portfolio manager? If yes, how often?
- Given that wealth creation and preservation is firstly about avoiding wealth destruction, how exactly will you protect our nest-egg from catastrophic losses whenever the next major financial crisis starts to unfold?
- Are they willing and able to fully “de-risk” our portfolio when necessary?
We look forward to participating in the upcoming 2017 World Outlook Financial Conference, including presenting information-packed Personal Finance Workshops. We hope to see you there.
Andrew H. Ruhland, CFP, CIM
Founder of Integrated Wealth Management in Calgary