Questions To Ask Financial Advisors
We encourage you to pose as many questions as possible to your current financial advisor / financial planner. We feel the value of our customized hedged portfolio service (stock investing with covered calls, cash-secured puts, combination hedges) 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 financial advisor, who places my interests above yours? A trusted advisor, or similar, is not held to the same standard as a fiduciary advisor, which may be fine, but may also expose your portfolio to high-fee financial products. If you are a fiduciary, what is your bias? (e.g. detailed planning, generic investing vs. specialized investing, without planning)
3. Do you potentially earn any commission dollars from our relationship? Are you eligible to earn commissions or bonuses if I purchase life insurance, invest in mutual funds, open a bank account, receive a mortgage, receive a new credit card or buy an annuity? If so, what is that potential commission amount, both initially and over time?
4. Do you potentially earn any referral fees from our relationship, internally or externally?
FEES
5. What is your financial advisor fee structure? Are you fee-only?
6. In addition to paying your financial advisor fee, what is the embedded management expense ratio of equity funds and ETFs that my capital will be invested in?
7. In addition to paying your financial advisor fee, what is the initial fee and/or embedded annual fee of mutual funds that my capital will be invested in?
8. In addition to paying your financial advisor fee, what is the embedded management expense ratio of bond funds that I will invest in?
9. In addition to paying your financial advisor fee, what is the embedded initial fee and total annual fee of annuities that my capital will be invested in, and explain what potential penalties - including discounted sale of investment value - I may incur if I want to sell the annuities sooner than expected?
10. In addition to paying your financial advisor fee, what is the embedded initial fee and total annual fee of real estate and private equity investments that my capital will be invested in?
11. Is my potential portfolio constructed internally or by a third-party? Are any additional embedded fees paid internally or to the third party, and if so, how much, and at what frequency?
12. How frequently will my portfolio be rebalanced? Will embedded rebalancing fees be charged? What is the annual embedded rebalancing fee charged to my capital?
13. What are the total fees I would expect to pay on an annual basis, including your financial advisor fee, embedded 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
14. What is your educational background and what designations do you hold? Are you either of a Chartered Financial Planner (CFP) who specializes in planning, or a Chartered Financial Analyst (CFA) who specializes in value-enhancing investment structures?
15. How much professional investment experience do you have?
INVESTING - STOCKS & BONDS
16. Will I have international stock exposure? If so, what are the key risks of owning international stocks?
17. Can you explain to me how bonds lose value when interest rates rise?
18. Can you explain to me how high government debt loads make long-term government bonds risky?
19. 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? In the same scenario, what will be the total loss of my portfolio, after fees?
20. I understand that the U.S. stock market (S&P 500) has historically fallen in approximately 30% of years since 1928. What investment strategies, beyond diversification, protect my downside loss exposure while enabling me to participate in robust years?
21. Do you provide customized hedged stock portfolios - consisting of tax-efficient covered calls, cash-secured puts, etc. - that generate hedged income while providing investment protection?
RESTRICTED STOCK UNITS (RSUs)
22. Do you provide any creative hedging strategies that permit me to reduce the concentrated risk of my RSUs without immediately selling?