14 Questions
Important Questions to Ask Before Selecting an Investment Advisor

It's been said that a journey of a thousand miles begins with a single step.  But, wouldn't the journey be easier with an experienced guide - someone who knows the terrain? There are many ways to find an investment advisor that will meet your needs. Since most advisors do not advertise, a good place to start is to ask a trusted professional like your attorney or accountant for a recommendation. Often the expertise of a friend or relative with good judgment and financial acumen may also be helpful. These questions may serve as a guide to help you find the advisor that is just right for you.

What are the advisor's professional credentials?  
Hire the services of an advisor with substantial professional education and training. A Chartered Financial Analyst (CFA) is trained in security analysis, the selection of investments and portfolio management. In order to become a CFA, one must pass three rigorous 6-hour examinations covering not only these subjects, but also accounting, economics and ethics. There are significant differences between the training, experience and credentials of stockbrokers, financial planners and registered investment advisors.

Is the advisor's approach objective?
Your advisor must avoid all conflicts of interest and work only in your best interest. The surest way to avoid a conflict of interest is to work only with an advisor who is paid a professional fee rather than a commission on the purchase or sale of securities in your portfolio. Fees may be charged on an hourly basis or be based on a percent of assets under management.

Did the advisor ask you personal questions?
A good advisor will ask you personal questions. Your answers to these questions will enable the advisor to design a personal investment program to meet you need for growth or income and to conform the portfolio to your tolerance for investment risk. Your advisor should ask you these questions:

1. How do you hold title to your assets?
2. What is your net worth?
3. What is your tolerance for risk?
4. Do you have a capital loss carry forward?
5. May I see a copy of your income tax return?
6. Do you have extraordinary medical expenses?
7. What annual rate of return do you expect?
8. What is your current income?
9. How much income do you need?
10. What are your investment goals?
11. Do you have any unusual investment requirements?
12. Do you have an up to date estate plan?
13. Are your assets held in trust?
14. Have you properly funded your trust?

What is the advisor's investment process?
There are many ways to be successful as an investor. A successful money manager will have a sound, logical and consistent investment process that he will follow whether in good times or bad.  Did the advisor explain his process in terms that were easy for you to understand? Are you comfortable with the process?

How will the advisor keep in touch with you?
Communication is critical for a successful relationship. A good investment advisor will call you no matter what the market may be doing. He will also call you from time-to-time to discuss investment changes that may be necessary to meet your changing needs.

Are you in your comfort zone?
Meet with the advisor in person before you sign any contract. You must be comfortable asking questions and the answers should be clear and understandable. Do you feel that you can develop a comfortable and professional working relationship with this advisor?

Is the advisor personally accessible?
Your portfolio manager should personally return your calls. You should be able to talk, at all times, directly with the person who makes the investment decisions in your portfolio.

Does the advisor consider your personal tax situation?
Whether using mutual fund asset allocation strategies or individual securities, ask the advisor if he will take into consideration your personal tax situation. This is very important to your overall investment success, because lowering your tax and management expenses will normally result in better returns from your investments. Research shows that more than 2½ percentage points of the average stock mutual fund's total return are lost to taxes each year. While mutual funds may provide adequate diversification, their impersonal nature does not permit you or your advisor to adequately fine tune the timing of capital gains or losses in order to minimize your taxes. The mutual fund manager makes changes in the fund's portfolio without regard to your personal tax situation. This can cause unpleasant surprises when you receive the mutual fund's annual statement of dividends and capital gains and find it is too late to reduce your tax exposure. An investment manager who is sensitive to your tax situation, and works with your existing portfolio of individual stocks and bonds can often achieve results that are more tax efficient.

What is the advisor's investment performance record?
Track records are important, but do not make too much of them. Past performance is not a guarantee of the investment advisor's future results. Simply picking today's top manager to handle your investments may not serve you well over the long run. The best use of performance data is to use it as a benchmark for comparison in order to weed out the laggards. Consistently poor investment performance is usually the result of an unsound or undisciplined investment process.

Will your assets be safe? 

Your investment advisor should never take possession of your securities. Instead, an independent third-party custodian such as a stockbroker, bank or trust company should be used to hold your securities. Assets should always remain titled in your name.