1. What type of advisor are they?
A Registered Investment Advisor (RIA) is registered with the Securities and Exchange Commission or a particular state and owes a fiduciary duty to its clients. RIAs are legally bound to put your interests ahead of their own and to avoid or disclose and mitigate conflicts of interest.
A broker-dealer is held to a lower best interest standard and may have additional conflicts of interests.
A robo-advisor is an RIA that utilizes a digital platform that collects information from clients through an online survey, then takes that information and makes automated financial decisions with little or no human supervision. There is very little, if any, interaction with a live person.
2. What services do they provide?
Some advisors provide investment management services only – managing your portfolio based on agreed-upon long-term goals. Wealth Management firms provide a big picture view with a broad range of additional financial counsel designed to help clients more effectively manage, monitor, and maintain their wealth.
3. What certifications do they have?
It’s important to understand any and all certifications your advisor has achieved. Some certifications to look for include:
- Chartered Financial Analyst® (CFA) – considered to be the premier investment management designation
- Chartered Financial Planner™ (CFP) – formal designation for an individual that has completed CFP certification process and recognized as an expert in financial planning, insurance, estate planning and retirement planning
4. How are they compensated?
You won’t be the first person to ask your prospective financial advisor how they’re compensated, so don’t be afraid to speak up. It’s one of the most important questions you can ask. Fee-only advisors are paid directly by clients through a flat fee, or a percentage of the assets managed. They are typically not compensated by transactions or through commissions. Transaction-based advisors are compensated by clients but also through other sources like commissions or transfers. Your financial advisor should let you know how they’re being compensated clearly, simply, and in writing.
5. How will they report results to you?
It is recommended that your financial advisor should meet with you at least once a year to share (1) a comprehensive written report of your net-of-fee performance, which is the amount of money made minus administrative expenses and (2) a review of your target asset allocation. It’s always important to let your advisor know if your current financial situation has changed since your last meeting. Some advisors may share less detailed reports on a monthly or quarterly basis. Making financial decisions can sometimes be uncomfortable, so it’s critical that you and your advisor are on the same page. You should always feel comfortable reaching out with questions or concerns. Frequent and fruitful communication is key to a successful relationship.
6. What is their five-year plan?
It can be helpful to learn and understand your financial advisor’s work experience, longevity with the firm, and long-term professional goals. An effective long-term financial plan is a living document that changes as your life does. Therefore, knowing your advisor’s five-year plan for the future can help ensure that you choose someone who will be there for you for the long term.
Finding the right advisor can have a significant impact on your financial health. In fact, 66% percent of people with financial advisors feel very financially secure, compared to just 31% of people without advisors. The path to long-term financial success starts with building the right plan for you, and the path to building a plan starts with choosing an advisor you trust.
For more than three decades, Cobblestone has been a trusted partner to individuals, families, and institutions. In the same way distinctive cobblestones are thoughtfully assembled to withstand any conditions, we provide the breadth of services, depth of expertise, and team approach required for resilient financial stewardship.
Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.
Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen or experience.
Industry registrations, designations, recognitions or awards should not be construed as an endorsement or a recommendation to retain the Adviser by the granting entity or any regulatory authority.