Here are some key questions to consider asking your current or prospective advisor, in light of the new fiduciary standard coming down the pike.
•With what federal or state agency are you registered?
Hint: If they hold a state insurance license, they have no fiduciary duty. Period. In the last five years about two-thirds of the states have adopted a suitability standard for the sale of annuity products. If they are regulated by the Financial Industry Regulatory Authority, or FINRA, they also have a suitability duty for their stock tips. If they are affiliated with a registered investment advisor, however, they have a fiduciary duty for their investment advice and if they personally manage your portfolio. If it’s a bank or credit union, they are fiduciary advisors only if they work in the trust department, not in other areas of the bank.
•What designations do you hold?
Hint: Only a handful of professional designations are generally recognized by state regulators for meeting basic competency standards in giving investment advice. The most widely recognized in the industry are the Chartered Financial Analyst and Certified Financial Planner marks.
•Are you legally required to act in my best interests as a fiduciary?
Hint: Don’t accept carte blanche any response that dances around the question, such as, “We always put our client’s interests first.” Fiduciary is the key word you’re looking for. Ask if they’ll sign a simple statement that they will do so, and save the original. Keep in mind that some brokers or insurance agents may be part-time fiduciaries for their investment advice but nothing else. At an absolute minimum, ask them to clearly disclose to you verbally at the time they give you advice (not buried in a client agreement) when they are not acting as a fiduciary.
•How are you paid?
Hint: Don’t accept the simple and patronizing answer, “By you, of course!” Don’t be shy. Press them on whether they or their firm receive any other sources of compensation for the products they recommend. If they take offense, just leave.
Recommendations from friends are fine; just remember that for the most part, it’s the blind leading the blind even if Aunt Sallie is well-off. She may not know she’s been paying more for her broker’s beach house over the years than her own. If the financial advisor you’re interviewing seems more interested in telling you how much they know about the markets, walk out. If they appear more interested in listening to your fears and dreams about the future, then you’re on the right track. You will need to verify, not blindly trust them, like Bernie Madoff’s clients did.
mintcofinancial.com
•With what federal or state agency are you registered?
Hint: If they hold a state insurance license, they have no fiduciary duty. Period. In the last five years about two-thirds of the states have adopted a suitability standard for the sale of annuity products. If they are regulated by the Financial Industry Regulatory Authority, or FINRA, they also have a suitability duty for their stock tips. If they are affiliated with a registered investment advisor, however, they have a fiduciary duty for their investment advice and if they personally manage your portfolio. If it’s a bank or credit union, they are fiduciary advisors only if they work in the trust department, not in other areas of the bank.
•What designations do you hold?
Hint: Only a handful of professional designations are generally recognized by state regulators for meeting basic competency standards in giving investment advice. The most widely recognized in the industry are the Chartered Financial Analyst and Certified Financial Planner marks.
•Are you legally required to act in my best interests as a fiduciary?
Hint: Don’t accept carte blanche any response that dances around the question, such as, “We always put our client’s interests first.” Fiduciary is the key word you’re looking for. Ask if they’ll sign a simple statement that they will do so, and save the original. Keep in mind that some brokers or insurance agents may be part-time fiduciaries for their investment advice but nothing else. At an absolute minimum, ask them to clearly disclose to you verbally at the time they give you advice (not buried in a client agreement) when they are not acting as a fiduciary.
•How are you paid?
Hint: Don’t accept the simple and patronizing answer, “By you, of course!” Don’t be shy. Press them on whether they or their firm receive any other sources of compensation for the products they recommend. If they take offense, just leave.
Recommendations from friends are fine; just remember that for the most part, it’s the blind leading the blind even if Aunt Sallie is well-off. She may not know she’s been paying more for her broker’s beach house over the years than her own. If the financial advisor you’re interviewing seems more interested in telling you how much they know about the markets, walk out. If they appear more interested in listening to your fears and dreams about the future, then you’re on the right track. You will need to verify, not blindly trust them, like Bernie Madoff’s clients did.
mintcofinancial.com
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