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Wednesday, December 1, 2010

5 Questions To Ask Before You Hire an Investment Adviser

Thousands of investment advisers are available to give you advice. Each has a different style and will yield a different result for you. Choosing one that best suits your needs is of utmost importance.

Here are 5 questions you should ask an investment adviser before deciding to hire them:

1) What is your training and experience?
Before hiring an investment adviser you should find out how long they have been in business and what they did before. You most likely will be looking for someone who has been in business for several years and has the background to deal with your particular issues.

2) What is your investment philosophy and your track record?
You will want to find an investment adviser whose investment philosophy is in sync with yours and who will appreciate and abide by your tolerance for risk. Consider asking for client references or information on how other clients’ portfolios have performed. If he or she refuses, that should be a red flag.

3) Can I have a copy of your regulatory disclosure forms? Are you registered to do business?
Financial planners and investments who are paid to give advice about investing in securities must disclose details about their investment style and philosophy, training, disciplinary record, fees and charges, and more. The most widely used disclosure is Form ADV. You can view an adviser’s most recent Form ADV at the Financial  Industry Regulatory Authority website, but it should be posted on adviser’s personal website as well. Always check with your state securities regulator to verify they are licensed to do business. In Washington, check with the Washington Department of Financial Institutions.

4) How will our relationship work?
You want to find out the relationship with your adviser will work. Will you talk with them directly or be dealing with their staff. How often can you expect to speak to them? Is the adviser willing to take spur-of-the-moment phone calls?

5) How much do you charge?
Ask how much you will be charged for their services. Will you pay an hourly fee, be charged a commission, or as a percentage of your assets under management? Any arrangement can work as long as you are aware and comfortable with the terms.

For more information about choosing an investment professional, see the Investor Protection Trust’s Getting Help with Your Investment Booklet (pdf).

Washington residents may request a free hard copy of the booklet by visiting