Questions to Ask a Financial Advisor

1.   What is their 5-year record?

 

2.    Is that record theirs?  For example, if you are looking at a mutual fund and there was a change in the fund manager, is the past performance of that fund relevant?

 

3.   Can the advisor explain their investment philosophy in simple language?  A 10-year-old should be able to understand the logic of the investment philosophy.

 

4.    Is the advisor sufficiently educated, trained and experienced?

 

5.    Ask the advisor, "why are you in the business?"  "Besides your alarm clock, what makes you get up in the morning?" 

 

6.   Can evidence be presented to back up the advisor’s investment approach?

 

7.   Where is the advisors own money invested?

 

8.   What is the advisor’s universe of investments?

 

9.   Has the financial advisor created personal wealth using their preached philosophies?

 

10.   Does the financial advisor preach to be a genius? If so, be wary, most good financial advisors are not geniuses.

 

11.  Is your financial advisor influenced by day-to-day fluctuations?

 

12.  Is your financial advisor concerned with benchmarks and window dressing?

 

13.   Did you know that the typical value manager under performs growth managers 60% of the time?  Yet, over ten to twenty years they generally outperform their growth peers by greater than 100%.

 

14.   How does your financial advisor get new investment ideas? 

 

15.   Does your financial advisor visit companies?  If so, do they ever find anything worthwhile?  I have visited CEO’s of major companies.  I can assure you, they do not let onto any type of negative news.  I do not think the CEO of a major company will say . . . “Ron, to be honest with you, our chief competitor is gaining market share and stealing our employees.  Furthermore, our technology is outdated.  To be more forthcoming Ron, we may not be in business in a year and a half.  Would it be okay if I gave you my resume?”