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What I May Not Know

What you don't know about your current advisor may surprise you or even shock you. What you don't know may be the difference between a lifetime of financial security and a future that's based on compromises. This may sound a little dramatic, but it's true because that's the difference between good advice that helps you achieve financial goals and bad advice that undermines the achievement of those goals.

If you are like most investors, you probably hired your current advisor for the following reasons:

• You liked the advisor's personality. He or she seemed like a nice person you could trust.
• The advisor said what you wanted to hear: For example, "I am a financial expert", "I can achieve your financial goals", "I can produce high returns for low risk", and "I have years of experience helping people like you".
• You were referred to the advisor by someone you like or trust.
• The advisor worked for a firm you had heard of, for example a big Wall Street firm, your local bank, or an insurance company
• The advisor worked for a firm you had heard of, for example a big Wall Street firm, your local bank, or an insurance company

All of these reasons are based on subjectivity and not the objectivity that helps you select a competent, trustworthy professional for the right reasons. Plus, all of the reasons are impacted by the advisor's sales and relationship skills. Unfortunately, these are not the skills that will help you achieve your financial goals.

Advisors do not have mandatory disclosure requirements for information that impacts their competence, ethics, and business practices. This makes it easy for them to say whatever helps them make the sale and to hide unfavorable information from unsuspecting investors. Therefore, it's up to you to know the right questions to ask to make sure your advisor is competent, ethical, and puts your interests first.

Examples of what you may not know about your current advisor include:

• His or Her Knowledge
  • Years of financial services experience?
  • College degrees?
  • Certifications and designations?
  • Association memberships with continuing education requirements?

• His or Her Ethics
  • Registered Investment Advisor or Investment Advisor Representative?
  • Acknowledged fiduciary?
  • History of investor abuses?
  • Criminal record?

• His or Her Compensation
  • Is the advisor compensated to help you achieve your goals or to sell you investment and insurance products?
  • How much money will the advisor make from your assets?
  • Is the advisor paid with fees or commissions?
  • Is the advisor willing to fully disclose his or her compensation?

• His or Her Potential Conflicts of Interest
  • Does the advisor have potential conflicts of interest that impact the performance, risk, or expenses of your assets?
  • Is the advisor willing to provide full disclosure for potential conflicts of interest?

• Hi or Her Financial Services
  • Does the advisor provide sophisticated services for complex markets?
  • Does the advisor provide planning, strategy and investment services?
  • Does the advisor provide open-architected solutions with no restrictions on your choices?
  • Does the advisor profide ongoing services versus one-time services?
  • Does the advisor provide quarterly performance reports?
  • Does the advisor optimize your portfolio for risk and reward?
  • Does the advisor recommend tax efficient solutions?

• His or Her Documentation
  • Is the advisor willing to put this information in writing so you have a permanent record of what was communicated to you?
  • Is the advisor willing to certify the information in the document is current, accurate, and complete?

These are just a few of the questions you need answered so you can determine the quality of your current advisor and compare him or her to alternative advisors.