updated April 25, 2018
If your advisor is not on the same page with you, it makes it harder to weather downturns. There are five very basic service points your advisor should be hitting, and if she is not, you should consider making a change.
- CONTACT Your advisor should have set clear expectations for regular ongoing meetings, and he should be meeting those expectations year in and year out. Regular contact allows you to voice concerns, and gives your advisor the opportunity to address those concerns before they become a problem. In addition, the best advisors put forth extra effort to communicate even more during market corrections. If your advisor does not execute well on regular ongoing meetings, and has not contacted you via phone or email during the most recent market turmoil, you should consider replacing her.
- REPORTING If your advisor is a commission broker, he is not required to report portfolio performance beyond the cryptic monthly account statements you receive. RIA firms are at least required to report to you quarterly or as their regulatory documents dictate. The best, most modern firms, are reporting in a way that clearly and concisely conveys where your money is and how it’s doing. All of our clients get a weekly email that tells them balance changes. That may sound like overkill, but it’s your money so you should know what it’s doing. If you are not receiving simple, easy to understand, and regular reporting it might be time for a change.
- BENCHMARKING Most advisors hate to be benchmarked, but that does not mean we shouldn’t do it. Matching up a client’s well-diversified portfolio to 500 of the largest domestic stocks is like comparing a basket of assorted fruit to an orange. However; indexes like the S&P 500 provide a point of reference for very healthy and productive client/advisor discussions. Stress testing takes it even a step further. Stress testing compares your positions against significant events, either from the past, or with forecasted future economic changes. If your advisor does not want to engage in benchmarking and/or stress test discussions, you can do better.
- PLANNING Many advisors only invest your money and provide little to no financial planning. Others promise planning, but never seem to get around to it. Comprehensive Planning and Wealth Management firms like mine believe investing and planning is a constant feedback loop where each relies on the other. I can’t invest someone’s money properly if I don’t know their goals, and vice versa. In today’s competitive marketplace, you deserve a comprehensive experience. Many independent RIA firms can deliver investment management and financial planning for a cost that compares very favorably to traditional retail investment channels, where planning is rarely a priority.
- FEE DISCLOSURE You should know what you are paying your advisor. If she is on commission then it is likely to be a sensitive subject, but understand, excessive expenses can severely limit your portfolio return. The best advisors want you to know what you are paying so they can prove they are worth it. We send our clients a complete and separate invoice when we deduct fees from their account, and we try to make fees a comfortable and open subject in meetings. If you cannot get a straight answer about the cost of advice from your current advisor, then consider it a red flag.
These five items summarize the basic level of service every advisory client deserves. Are you receiving this level of service? If not, use this as an opportunity to explore other options. If you have questions or comments, please do not hesitate to contact us.