Questions Every Investor Should Ask Their Adviser

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Many investors evaluate not only their portfolio performance but also their relationship with their financial advisor from time to time. Many times people base their evaluation of their advisor on their portfolio performance, but there are other components to consider. Asking these questions can help you determine if you and your advisor are mutually aligned:

Question #1: Are you a fiduciary? 

A fiduciary has a legal and moral responsibility to take care of your assets and act in your best interest. A fiduciary is a financial advisor (person) who receives compensation for the management of your assets and the financial advice they give.

Why is this important? There is a critical distinction between being a steward of a client’s assets vs. pitching products to generate a sale. 

Question #2: What fees do I pay?

There is no such thing as an investment that doesn’t cost you anything.  You should always ask so that you know what you’re paying for. 

Fees that are a part of the assets under management include fund management fees, portfolio management or asset-based fees, platform fees, charges on commissions, trades, M&E fees, and rider fees. All costs associated with your portfolio are dependent on where the funds sit. We welcome your inquiry on what your specific fees are for each fund in your portfolio.

Question #3: How are you compensated, and by whom?

Advisor compensation can be very complicated when it involves commissions. Many times there is compensation for advice as well that may not include commissions. In reality, commissions are usually how an advisor makes their income, by selling you investment products. The commissions are paid to the advisor who sells you a product from the fund-company or broker-dealer; if they don’t sell you something they don’t get paid.

Understanding advisor compensation is essential for determining an investment’s true cost.

Question #4: Where do my portfolio and investment recommendations originate at your firm?

Many times when you purchase investment products, the product itself sits with the broker-dealer or at the wirehouse. Sometimes the firm, not the advisor, often is responsible for creating portfolios. The recommendations advisers give you in these circumstances originate from the broker-dealer or wirehouse based on the portfolios they’ve designed. There may be other recommendations or products that ensure the client’s portfolio meets their situation, timeline, or risk tolerance.

Question #5: Who handles my account?

Depending on your situation, your account may sit at a broker-dealer or with a wirehouse. You may need to have one person assist you with one transaction while another helps you with something different if you rely on customer service if you don’t work directly with a financial advisor.

In other business models, the advisor will focus on the specialties they each have. They will help you because each client is a client of their firm.   You have access to each member of their team depending on your circumstances, which may change from time to time and require individualized help or advice.

Asking questions of your adviser is your right; after all, they work for you. If you have questions about our relationship or your investments, please don’t hesitate to ask. We’re always here to help. 

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.