Consider The Following:

  1. Is the firm or advisor you’re considering registered under the Investment Advisers Act of 1940 which, by law, requires that the client’s interest come first and foremost?

  2. Is the advisor or firm offering plans and products customized to your needs? (Avoid boiler plate plans and off the shelf products sold by a firm.)
  3. Recognize and beware of “false comforts”:
    1. Most investors are under the impression that their financial advisors work for their best interest. This is one of Wall Street’s biggest misconceptions. The first interest of financial advisors is to the firm who pays them.
    2.  Are you hiring a financial advisor because of friendship or personality? “I like my financial advisor.” (First, you may feel you are being taken advantage of and second, that you are being taken for granted. In such instances, it is difficult to “fire” or dissolve the relationship if things don’t work out.)
    3. Is your hiring decision based on fancy plans printed on glossy paper showcasing charts and graphs? (If the plans are not funded with the right investments for you, the fanciest plan is not worth a plug nickel.

After you’ve made your hiring decision, perform a periodic or an annual review:

  1. Are my investments working to achieve my financial goals and objectives?
    1. A simple conservative balanced program should potentially double one’s money in 10 years. So, is mine on track to do so?
  2. Given the increasingly global volatility, are my investments safe?
    1. Am I exposed to emerging markets? Am I exposed to currencies?
  3. Are there investments in my portfolio which are generating expensive fees for the firm rather than working in my best interest?
    1. Hedge funds are renowned for heavy fees.
  4. Are there investments in my portfolio that cannot be sold without a heavy penalty?
    1. Annuities are famous for hefty penalties if sold early.
  5. Are there investments in my portfolio that cannot even be sold, period.
    1. Non-publically traded REITs are a good example.
  6. Are the investments in my portfolio keeping pace or trailing badly relative to the various benchmarks?
    1. Managed accounts are notorious for market underperformance.
  7. Are there investments in my portfolio which are just plain dangerous due to their high risk?
    1. Many investors are sold income issues to later find out they are dressed up “junk” bonds.
  8. Just what are my total fees and costs of the investments in my portfolio? Are there “hidden” fees?
    1. Structured products like structured notes are loaded with hidden fees. Brokers usually make as much if not more than clients.
  9. Does my portfolio contain ETFs (Exchange Traded Funds)?
    1. ETFs are fraught with excessive trading risks.
  10. Index funds are becoming increasingly the investment choice among those supposedly “in the know”. Aren’t there any risks?
    1. Yes, all fads eventually lead to losses, as will using index funds like Pied Pipers. Just as “portfolio insurance” led to massive losses in 1987, investors will find plenty of losses with the index funds once the bubble pops.
  11. Does my portfolio include some investments which are just not appropriate for retirement accounts?
    1. Tax-deferred annuities in IRAs are just a no. They appear in many accounts as the commissions are so large.

Ask the Right Questions to Attain Desired Returns