What You May Not Know About Your Current Financial Advisor

What you don't know about your current advisor may surprise you or even shock you. If you had this information you never would have selected this advisor. This may sound dramatic, but keep in mind we are talking about the person who influences or controls your financial decisions.

Why Don't You Have This Information?
Advisors control the information that investors use to screen, evaluate, and select them. This is the equivalent of the fox guarding the henhouse. When advisors control this information, they don't volunteer any information that negatively impacts their ability to sell you investment and insurance products. As you might imagine, omitted information is a major source of risk. For example, you don't know the advisor is new to the industry and has little or no planning or investment knowledge. No advisor will volunteer this information and they will do their best to hide it from you.

Subjective Selection Criteria
If you are like most people, not only did you let advisors' control the information you used to select them, you also based your decision on subjective criteria:

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

All of these reasons have a common source of risk. They are based on subjective criteria that have nothing to do with the competence and ethics of the advisors. Plus, all of the criteria are impacted by the advisors' personalities, sales skills, and marketing messages. Although these criteria sound good, they don't help you select a quality professional.

Track Records and Mandatory Disclosure Requirements
It's unfortunate, but advisors don't have mandatory disclosure requirements for this type of objective information. Plus, they don't have track records that document the results they produce. Consequently, it's easy for them to say whatever causes you to buy what they are selling. The reality is you have to know the right questions to ask and you have to know good answers from bad ones so you select advisors for the right reasons.

Questions for Advisors
You should obtain WRITTEN responses for the following criteria:

• Competence
  • Years of financial services experience?
  • College degrees?
  • Certifications and designations?
  • Association memberships with continuing education requirements?
• Ethics
  • Registered Investment Advisor (RIA) or Investment Advisor Representative (IAR)?
  • Acknowledged fiduciary?
  • Disclosures on compliance record?
  • Disclosures on criminal record?
  • CRD or IARD number
• Compensation
  • Is the advisor compensated with fees to help you achieve your goals?
  • Or, compensated with commissions to sell you investment and insurance products?
  • How much money will the advisor make from your assets?
  • Will the the advisor provide full disclosure for all compensation?
• Potential Conflicts of Interest
  • Does the advisor have potential conflicts of interest that impact the performance, risk, or expenses of your assets?
  • Does the advisor market any proprietary products?
  • Does the advisor provide open-architected solutions with no restrictions on your choices?
  • Is the advisor willing to provide full disclosure for potential conflicts of interest?
• Financial Services
  • Does the advisor provide planning, strategy, investment, and reporting services?
  • Does the advisor provide ongoing services or one-time services?
  • Does the advisor optimize your portfolio for risk and reward?
  • Does the advisor recommend tax efficient solutions?
• Documentation
  • Will the advisor put information in writing so you have a record of what was said to you?
  • Is the advisor willing to certify the information in the document as being current, accurate, and complete?

Answers to these questions help you select a quality advisor who has the knowledge and ethics to help you achieve your financial goals with no hidden information.

Authored by Jack Waymire

• Co-founder of www.PaladinRegistry.com
• 32 Years of financial service industry experience
• Author of the best-selling book, "Who's Watching Your Money?"

This editorial is for information purposes only and is not intended to be financial, tax, or legal advice. We strongly recommend you use the services of a qualified professional for these types of advice and services.