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Odds are your current adviser is doing good work, but are they doing the best work for you?
Are you a fiduciary 100% of the time?
Unlike most professionals, financial advisers have a choice of operating under one of two professional standards: suitability or fiduciary. The fiduciary standard requires advisers to act in their client’s best interests, whereas the suitability standard does not.
Advisers fall into one of three camps: fiduciary all the time, suitability all the time or both. Those that do both “wear two hats” by switching back and forth between suitability and fiduciary standards.
Don’t settle for the part-time fiduciary. It’s best to verify they’re acting as a fiduciary all the time.
How many physicians do you work with?
Cutting-edge advisory firms are building niches to stay relevant and provide the best possible value to their clients. Industry experts say firms should target between 50 and 150 clients per adviser depending upon the level of services provided. If they’re dedicated to a specific niche, at least 50% of those clients should be within it. The more specific their niche, the better. Ideally your adviser has a manageable number of clients with a very high percentage consisting of physicians just like you.
How does your firm’s revenue percentage breakdown?
Today, most financial advisers are proudly beating the financial planning drum.
Some firms offer “free” financial planning and use it as a back door sales tool to sell more financial products. Others bundle it with investment management services and consider it a value-add. And then some firms charge for stand-alone financial planning services only or in combination with other services.
If you’re uncomfortable asking the question, or the answer is ambiguous, a quick ADV search can give you an idea of how much financial planning they’re doing. Visit bit.ly/IAPD-search, enter your adviser’s firm and click on“View Latest Form ADV filed.” Scan down to Item 5 and you’ll see a good bit of information on the firm’s advisers and clientele.
Are you fee-only or fee-based?
Fee-only advisers can only accept fees directly from clients. They’re not permitted to accept any referral fees, commissions, or kickbacks from third parties. Fee-based advisers accept client fees and commissions or other types of compensation. Understand your adviser’s fee structure, and you’ll be well equipped to identify conflicts.
How much am I exactly paying you for this service?
As uncomfortable as this question is, it’s legitimate. Financial advisers traditionally haven’t done a good job of explaining how their compensation and services work. Nonetheless, you have a right to know. As a client, how can you possibly measure the cost/benefit of working together if you’re not clear on services and costs?