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Once you’ve researched prospective investment advisers and brokers,
it’s time to ask questions. In The Little Book of Smart Money (Wiley &
Sons Inc., 2010), author Jason Zweig, personal finance writer for The Wall Street
Journal, recommends you sit down with the candidates and ask these questions:
•
What made you want to become a financial adviser?
•
Do you focus primarily or exclusively on asset management, or do you also have
expertise in taxes, retirement, and estate planning, as well as budgeting and debt
management? What education, training, experience, and licenses do you have in
these practice areas?
•
What is your philosophy of investing? Do you rely mainly on lower-cost index mutual
funds? (If the answer is “No,” ask to see evidence that the alternatives actually have
worked as well or better.)
•
How high an annual return on my investments do you think is feasible? (Anything
above 10% suggests the adviser is either delusional or dishonest. Answers below 8%
start to make sense.)
•
How do you manage risk?
•
What needs and goals does your typical client have?
•
How many clients do you have, and will you personally manage my account?
How much time should I reasonably expect you to devote to me over the course of
a typical year?
•
Describe something you achieved for a client that makes you proud.
•
What’s the worst mistake you’ve made with a client?
•
How do you go about resolving conflicts with clients?
•
Describe the process you have in mind for helping me to achieve my goals. How will
you monitor our progress?
•
When recommending investments, do you accept any form of compensation from
any third party? Why or why not?
•
What are your services likely to cost me in a typical year? What percentage
of my assets will you charge in annual fees? How do you report your fees
and commissions?
•
May I see a sample account statement, and can you explain it to me clearly?
•
Can you provide me with your resume, both parts of your Form ADV, and at least
three references?
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