Picking a financial adviser follows lots of questions

After the sales pitch, it'll be your time to talk

October 19, 2003|By KNIGHT RIDDER/TRIBUNE

How do you pick a financial adviser?

By carefully working your way through the adviser's credentials, the price you'll pay and the services you'll receive.

When the sales pitch comes your way, examine it closely, item by item.

How will the adviser be paid? There are fewer and fewer commissioned sales people in the securities industry. Many brokers have switched to a percentage fee structure that's based on the dollar amount of assets under management that can range from 1 percent to 3 percent.

Ask the adviser whether he or she collects additional commissions from mutual fund companies or others that sell the investments the adviser recommends. This is an important factor in evaluating the adviser's independence.

What will you get for your money?

If all you need help with is selecting investments, then make sure that's what you'll get.

A bank financial adviser may recommend only the products sold by the bank's mutual funds arm. It'll still be up to you to decide whether you want to go further, to compare those investments with others on the market. If you're interested in a total financial plan, involving insurance, taxes and help with your estate, then you need to be certain that is included in your fees.

Check on whether the adviser's record is blemished with complaints, regulatory actions, bankruptcies or criminal charges.

Ask the adviser to give you a sample financial plan.

Ask the adviser how well his or her clients have fared during the three years of the bear market. You want to see annual returns compared to the market. You want to see how the adviser's advice fared during the good years, too. So ask for numbers from 1998 and 1999 as well. Then get a year-to-date performance.

The Securities Industry Association suggests asking a financial adviser these questions:

What are your ideas about how someone like me should be investing?

What types of investments do you sell the most?

How will you help me plan for my financial goals, such as retirement or sending my children to college?

How will you keep me up to date on my investments?

How often will you review my plan?

What types of investments do you sell the most?

What continuing services will I get and how much can I expect to pay each year?

Do you have clients who would agree to be references?

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