Imploding investment portfolios and news of financial scandals have many investors questioning their financial advisors’ reliability, said Paul Sullivan in The New York Times. They should be. Almost 36 percent of wealth managers say they don’t feel fully qualified to do their job, according to a recent PricewaterhouseCoopers survey. Too many people look no further than the brand name of the firm or the reputation of the advisor. That’s no substitute for asking tough questions and doing “some serious due diligence.”
Before you sit down with an advisor, prepare a list of pointed questions, said Mary Pilon in The Wall Street Journal. Among other things, find out where the advisor has worked and for how long; job hopping is a red flag. Get an idea of his investment style by asking what products he tends to recommend. Ask what his typical client is like and how he manages his own money. “If an advisor is cagey about giving straightforward answers to any of these questions, you should take your business elsewhere.” Finally, have the advisor clearly explain how he is compensated, including any bonuses for selling particular products. Run the advisor’s name through the Financial Industry Regulatory Authority’s BrokerCheck, at Finra.org. You can see his credentials and find out whether he’s been tangled up in any shady dealings.
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