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5 Things Your Investment Advisor May Not Tell You (Or May Not Know)

Don't hesitate to ask questions about their recommendations

By Christine D. Moriarty

Financial professionals are paid to be the experts, but sometimes what they do not know – or do not reveal – has more of an impact on your money. When the market is going gang busters like the last two years, you would expect solid returns, but look beyond the returns on your investments. Pay attention by asking more questions about their advice and recommendations. 

An older couple meeting with an investment advisor. Next Avenue, financial advice
Credit: Getty

Here are five details to understand and discuss with your investment advisor:

1. They may not be the person managing your assets. Find out who is watching the day-to-day investing details.

Do not assume your investment advisor is acting alone, most likely they are not. They are the front person who services your account and knows your personal financial situation. They can advise how to build your investments for a sustainable retirement, remind you to take your Required Minimum Distribution (RMD), and guide you in your transition to retirement. 

Do not assume your investment advisor is acting alone, most likely they are not.

Chartered Financial Analysts (CFA) are trained and licensed to manage investments. They work for investment firms of all sizes to evaluate the stock market. A mutual fund may have a team of CFAs to do the investing for you. Meeting them may not be necessary, but do understand their experience. 

Your advisor should know the team that is investing your money and have access to them if they, or you, need more information.

2. Their recommendations may include other factors. 

Their compensation may influence their advice, especially when it comes to charitable donations and cash. If your investment professional is earning an annual fee, they have a vested interest in growing your money.

If they work for a larger firm, they may be influenced by commissions, promotions or other internal corporate factors. They still may make a good recommendation but not the best one for you. Check with them to see if they are a fiduciary, who are required always to act in your best interest.

Understand where there may be conflicts. For example, if you want to give a large portion of money away to charity, their income will be impacted negatively.

Another challenge is regarding cash. We all know cash does not earn much interest, but everyone needs to keep some available. If you hold $50,000 in your advised account for that purpose, you may be getting charged an annual fee on those holdings. Instead, keep your cash needs in the local bank and save the fee, while getting FDIC insurance.

3. Their expertise may be limited.

Like the medical profession, the financial professionals have specialties, such as tax issues, annuities or insurance. If you are looking for the information on the best way to save taxes, consult an accountant along with your investment professional. They each have different perspectives providing the best solution for you.

Use the same approach when it comes to buying insurance and annuities, where commissions are involved. There are a range of products, so if your investment advisor only sells from one company, get an alternative suggestion. Comparing for yourself could save you money and provide better benefits. Or hire an objective financial planner, even if you have to pay them an hourly fee.

Remember your investment advisor does just that, investments. If it is not their area of concentration, you will be best served by the team approach. 


4. They may not be the right size for you.

If your portfolio is smaller than their average client, you may not get the attention you desire. If you are their largest client, the advisor's knowledge and experience may not match your needs. Ask more than how many clients they have. Find out the average size of their client's portfolio because you want to know they have other clients like you.

Find out the average size of their client's portfolio because you want to know they have other clients like you.

Tax strategies and investment options vary with the more assets you have. Sticking with your current planner because you like or are comfortable with them may make sense only if this is sensible for your portfolio. Or diversify by having a second or third investment portfolio with different advisors, with each advisor providing their investment philosophy and specialized expertise.

For example, an inheritance may already be invested wisely, so no need to move it to your investment advisor's firm. Bottom line: Be aware you may outgrow your investment advisor or need to find a better fit.

5. Know your advisor's background.

As Consumer Reports tells the rest of the story on products, Financial Industry Regulatory Authority (FINRA) provides background on your financial advisor or potential advisor. This is an independent regulator and you can do your research for free at BrokerCheck. At this FINRA site, you can see your broker's professional history, education and licenses and most importantly, if they have had any legal challenges against them.

The wealth of information is meant to be a way that the public can source out the right person for them – qualified, legitimate and problem free.

When a friend asked me for advice about the two financial professionals she had met with, I directed her to BrokerCheck. Though they had seemed experienced and knowledgeable to her, what she discovered was informative. One of them had worked for three different companies in the past four years, too many for her taste, and the other more disturbingly had two legal cases against him for presenting misleading information. 

You need to be comfortable with your advisor but also aware of the limitations of their work and experience. You must know more than they are a "nice person" and are creating a return on your portfolio. Stay involved enough to ask questions. Trusting enough to be open to suggestions while reviewing objectively.

It is your money and your responsibility. 

Christine D. Moriarty
Christine D. Moriarty 

C.D. Moriarty, CFP, is a Vermont-based financial speaker, writer and coach. She can be found at
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