What Questions Should you Ask?


  • Step 1

    Search for an advisor that you can trust. It's sad, but misplaced confidence is a primary cause of financial disaster for many investors. Of course, it's mostly preventable. Just as a leopard does not change its spots, persons with unsavory backgrounds tend to repeat. How does this translate? Consider no advisor on whom you've not obtained a) an exemplary personal credit report, b) a clean record for disciplinary actions and lawsuits, and c) personal recommendations from at least three current clients of adequate duration.

  • Step 2

    Review the prospective analyst's experience. There's something about the passage of time that tends to shake out the unworthy. As an industry undergoes its normal ebbs and flows, those participants who cannot acclimate are separated out, either voluntarily or otherwise. And those are exactly the persons you do not want advising you. It's my belief that anyone with less than seven years of verifiable experience as a financial advisor should not be considered. Why seven? There's just something about that time span with which I feel comfortable.

  • Step 3

    Evaluate credentials. Although it adds credibility, recognize that a Certified Financial Planner (CFP) designation is not the be-all and end-all of an advisor's qualifications. Only single courses in Estate Planning, Income Tax Planning, and Investment Planning are required in the six-subject course of study and, as expected, the latter subject focuses only on the traditional securities market. What you really require in a counselor is diversity. My financial advisor's credentials include various university degrees and professional designations, with experience that includes tax return preparation with the national accounting firm of Touche Ross, real estate appraisal for the General Motors Corporation, service as a superior court Receiver, organization and operation of a private trust company, and has supervised his personal investments comprising a mix of real estate, corporate securities, and mortgage lending for more than three decades.

  • Step 4

    Favor a compatible investment pattern. As an ideal investment goal, let your counselor's personal portfolio of investments reflect your own. If it does not, you've chosen unwisely. Then keep regularly abreast of your advisor's financial activities so that you may, if you choose, mimic them.

  • Step 5

    Avoid a possible conflict-of-interest. You do not want an advisor who profits by putting you in or taking you out of an investment. The best situation is where advisor and client profit or lose together. Next best is an advisor, paid to provide advice, with no other financial stake in the decisions the client makes.