Questions To Ask Your Current/Potential Financial Advisor
We encourage you to pose as many questions as possible to your current financial planner or your potential future investment advisor. We feel our value to you becomes most apparent once the competitive landscape is fully understood.
Don’t know what questions to ask? We do; please see below:
ASSET SAFE HARBORING
1. Which financial institution will serve as a custodian for my assets?
PRIORITY OF INTERESTS
2. Do you serve as a fiduciary advisor, who places my interests above yours? (A trusted advisor, or similar, is not held to the same standard as a fiduciary advisor; specifically ask if the advisor is a fiduciary).
3. Do you potentially earn any commission dollars from our relationship? Will you earn a commission if I purchase life insurance, invest in mutual funds, open a bank account, apply for a mortgage, receive a new credit card or buy an annuity? If so, what is that total commission amount, both initially and over time?
4. Do you potentially earn any referral fees from our relationship?
FEES
5. What is your fee structure? Are you fee-only?
6. In addition to paying your fee, what is the hidden management expense ratio of equity funds and ETFs that my capital will be invested in?
7. In addition to paying your fee, what is the initial fee and/or hidden annual fee of mutual funds that my capital will be invested in?
8. In addition to paying your fee, what is the hidden management expense ratio of bond funds that I will invest in?
9. In addition to paying your fee, what is the hidden initial fee and total annual fee of annuities that my capital will be invested in?
10. How frequently will my portfolio be rebalanced? What percentage of assets are hidden rebalancing fees? How often is this hidden fee charged to my capital?
11. Is my potential portfolio constructed internally or by a third-party? Are any additional hidden fees paid internally or to the third party, and if so, how much, and at what frequency?
12. What are the total fees I would expect to pay on an annual basis, including your advisory fee, hidden fees for funds I will be invested in (including ETFs and bond funds), mutual funds, annuities, rebalancing fees, referral fees, commissions, and all other items?
CREDENTIALS
13. What is your educational background and what designations do you hold?
14. How much professional investment experience do you have?
INVESTING
15. How do you determine what the fair value of stocks are worth?
16. Do you ever expect stocks to fall in any given year, or is every year a good year to invest?
17. Can you explain to me how bonds lose value when interest rates rise?
18. Why do long term bonds lose more value than short term bonds when interest rates rise?
19. Will I have international stock exposure? If so, what are the key risks of owning international stocks?
20. If annuities are recommended, how do they function? Can you please explain in detail and also elaborate upon the multiple layers of fees, including initial fees and recurring fees. Please explain the potential penalties, including discounted sale of investment value, that I may incur if I want to sell the annuities sooner than expected.
RISK MANAGEMENT
21. I understand that the U.S. stock market (S&P 500) has historically fallen in over 25% of years since 1928. What investment strategies, beyond diversification, protect my downside loss exposure while enabling me to participate in robust years?
22. If stocks uniformly fall 10% this year, and bond yields uniformly rise 1% this year, what will be the total loss of my portfolio, before fees, and after fees?