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| Connie Farmer Ray CEO/President Coldwell Banker Platinum Partners |
By Steve G. Blum
Negotiating is always a give and take. That means not just listening to what a financial advisor has to say but also holding up your end of the exchange. Before you sign any agreement, you’ll want to find out what your prospective financial advisor is like as a person. You’ll want to find out about their business and their industry. You’ll also want to think hard about their true interests and whether those align well with your own.
All of this means asking questions…and lots of them! Get the advisor talking. Seek clarification. Show interest in what they have to say and ask them to tell you more. Below is a basic list of questions to get you started, along with more intensive questions to explore areas that should heavily influence how (or if) you enter into a professional relationship with a financial advisor.
The Basics
• What credentials have you earned? What did you study in college? What college degrees did you earn? From which colleges?
• How are you regulated? What role do you personally play in complying with all regulatory requirements?
• Will you give me two or three investment statements for your current clients (with their names and identifiers redacted, of course) so I can see how you actually invest?
• Do you have a fiduciary duty to me? Explain what that means to you. Are you willing to put that in writing?
• Do you think that, with hard work and careful study, a smart investment manager can pick stocks that will consistently beat the appropriate market averages? Why or why not?
Get Intensive
• Would you be willing to tell me all the ways you and your firm make money? If not, then why not?
• How do you deal with the problem that your interests and mine are sometimes in conflict?
• Does your firm receive any fees or “soft money” from anyone other than its clients?
• Do you consider yourself a “professional”? What does that mean to you?
• What percentage of your work is spent serving your current clients? How much is spent looking for new clients?
• When called upon to suggest an investment, describe to me your process for deciding what to recommend.
• What are reasons I should trust you?
• What are reasons I should hesitate to trust you? (And how do you work to minimize those reasons?)
• What differentiates you from your competitors?
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