Questions, and a time line, for an adviser

The Ticker

January 02, 1998|By JULIUS WESTHEIMER

FOR THOSE those seeking professional guidance on handling their finances, how should they go about selecting a good investment adviser?

Before looking, be sure you are emotionally suited for stocks. As James D. Hardesty warns, "As headlines trumpeted the Dow Jones surge over the past three years, many people lost sight of the fact that placing their money in stocks is one of the riskiest investments one can make."

To find an adviser, ask family and friends who already use them. The Coyne & McClean newsletter says: "In selecting an adviser, investors should find out how many accounts he or she supervises (over 40 is too many), beware of too many personnel changes and never choose a manager on the basis of last year's performance alone."

QUESTIONS TO ASK: How long have you been in this business? What is your experience in "down" as well as "up" markets? How much money do you manage? May I see your performance results? How are you compensated -- by fee or commissions? Will you meet with me at least twice a year? Will you handle my account personally or do you hand it over to a subordinate? When are the best times of the day to call you?

MORE QUESTIONS: What is your investment philosophy -- growth or income? Do you try for short-term or long-term profits? Do you use mutual funds or individual stocks, or both? What stocks do you like now, and why?

Interview at least three candidates, pick one and give him or her two years to perform. If results are unsatisfactory compared to popular averages, warn your adviser. If performance is bad for three years, change advisers.

Not everyone agrees an adviser is necessary. "Don't overestimate the skill and wisdom of investment professionals," writes Peter Lynch in "One Up on Wall Street."

"The fewer advisers and analysts who follow a stock, the more encouraging for its future. If Wall Street hates a stock, buy it." (Martin Sosnoff in 1998 "Stock Trader's Almanac")

"There's nothing wrong with telling your adviser to hold some cash. Cash quiets the nerves -- and gives you time to think." (Robert Prechter, Elliott Wave theorist)

Pub Date: 1/02/98

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