Rick Welch: Dollars and $ense

“Choosing the Right Investment Advisor”

Registered investment advisors (RIAs) come in all shapes and sizes.  Some advisors work for large financial institutions, like banks or stockbrokers, while others work for independent advisory firms. In both categories, you can find skilled investment advisors who have the experience, credentials, resources and smarts to work with you and improve your chances of reaching your long term investment and retirement goals.  Here are some suggestions for choosing the right advisor for you:

  1. It is about you.  The relationship between client and advisor is a personal one. Choose an advisor that you feel comfortable with, one who welcomes your questions and gives you answers that you can understand. Make it clear that you are looking for personalized investment advice that is aligned with your financial needs, objectives, risk tolerance and investing time horizon. Your advisor should be someone you have confidence in to make decisions that are in your best interests.   
  2. Do your homework.  To learn about an advisor’s work experience visit their website or Linkedin profile. Review the Form ADV which is used by investment advisors to register with both the Securities and Exchange Commission (SEC) and state securities authorities. Stay clear of advisors with checkered pasts.
  3. Safety.  Most RIAs use institutional custodians to hold and protect client investment accounts. Make sure you understand how your assets will be held, how trades will be executed and how regular performance reporting is accomplished.  Ask to see a sample report. Does the report give a clear and concise look at investment performance?  Is asset allocation and investment mix clearly reported?
  4. What type of relationship are you looking for?  Will you work with a principal of the firm, an associate or a team of advisors?  Developing a comfortable working rapport with your advisor is essential. Ask an advisor, “Why should I want to work with you?”   
  5. Communication is the key.  Sound advisory relationships depend on good, clear and regular communication.  Find out what type and frequency of communication you should expect.  Is the advisor a good listener?  Does he or she ask me questions and seem to be interested in me?
  6. Fees.   Make sure you understand the fee structure upfront.  Are fees based on a percentage of assets under management or does the advisor receive compensation from commissions on the investments they buy and sell for you?  Some advisors may receive both fees and commissions. 
  7. Investment Style.    How does the advisor design and manage a portfolio?  Can the advisor clearly explain their investing style and approach?  How are investment decisions made?  What type of research do they rely on?  How do they react to sudden changes in the financial markets?
  8. Be your own best advocate.  Remember that choosing your advisor is just the first step.  Make sure that your advisor is serving you in accordance with a written investment policy statement that is current. Stay involved in the investing process.  Do not follow any advisor blindly.  Ask questions. 
  9. Nothing is forever.  If you are unhappy with your advisors work, then tell him or her what corrective action is needed.  If you no longer feel important to your advisor, speak up.  If your telephone calls or e-mails take days to be responded to it may be time to make a change.  
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