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Questions to ask when choosing a advisor qcwm
This document discusses 5 key questions to ask when choosing a wealth advisor: 1) What kind of services are needed? 2) What level of service is best - self-directed, professionally managed, or both? 3) What kinds of advisors are available - those guided by suitability standard or fiduciary standard? 4) Is the advisor competent, with experience preferred over just designations? 5) How is the advisor compensated - fee-only, fee-based, fee-plus-commission, or commission-only? The document aims to help individuals understand their options and find an advisor that best fits their needs.
Questions to ask when choosing a advisor qcwm
- 1. 5 Key QuestionsYou Should Be Asking When Choosing a Wealth Advisor? 1
- 2. Key Question #1 What Kind of Service Do You Need? Are you looking for comprehensive Financial planning? Portfolio / Investment management? Estate planning? Insurance advice? Retirement / Income planning? Asset protection strategies? College planning? Tax advice? Or something else? You need to find an advisor that specializes in these services you need. 2
- 3. Key Question #2 What Level of Service is Best for You? 1. Self-Directed 2. Professionally Managed 3. Both Every individuals ability to manage and maintain their financial goals are different. Key factors to take into consideration are your time and expertise. Taking the time to understand the complexity of all the financial solutions and how they relate to your personal circumstances may be daunting. You must consider the following into your calculation; time, types of investments, retirement issues, tax issues, legal issues, estate issues, insurance issues, fees & costs. Most importantly how do you coordinate it all to assure you are your path to financial success. 3
- 4. Key Question #3 What Kind of Advisors are Available? Today, investor protections and standards of care are more critical than ever. Understanding the structure to the relationship between investors and their financial advisors will assist you in your decision. In today’s economic environment, it’s important to know that NOT all financial advisors are created equal. Advisors Guided by Suitability Standard: Suitability standard of care usually means an advisor need only suggest products that are suitable for your objectives, your income level and your age. Also, no disclosure is required for possible conflicts of interest. Advisors Guided by Fiduciary Standard: Fiduciary standard of care means doing what is best for the client; namely, always putting the client’s interest before the advisors. It also means disclosing any possible conflicts of interest including compensation related to products or referrals. 4
- 5. Key Question #4 Is the Advisor Competent ? When selecting a financial advisor, it is important to ask how long the advisor has been in business -- and the breadth and depth of his/her experience. Simply completing an exam, degree, or designation will not make any financial advisor an expert in helping you reach your financial goals. Even the designations behind his/her name provides only a basic level of knowledge about financial planning. Expertise only comes after long years of advanced studies combined with many years of intense application in the real world application of financial planning strategies. It is not un-common to discover financial advisors with years of experience and who have provided financial planning solutions that have more prudent insights and judgment than others who simply hold the recognized designations. I'll take experience over designations anytime, though I would prefer a planner who had both. Asking for client referrals or recommendations will go a long way to assisting you in this decision. 5
- 6. Key Question #5 How is the Advisor Compensated? Financial advisors may receive fees, commissions, or both. This distinction is important to you, because it may affect your cost and the service you receive. Four Ways Advisors are Paid for their Service: 1. "Fee-only" advisors charge a fee for their services, but don't receive a commission when you purchase a product. 2. "Fee-based" advisors charge you a fee that's enough to fairly compensate for planning work, but they may also get a commission on any products you purchase. 3. "Fee-plus-commission" advisors sometimes charge a fee, but most of their compensation comes from commissions. 4. "Commission-only" advisors don't charge any fees; their only pay is commission from the products you purchase. 6
- 7. Wealth Management Services Preparedby : Investment Management Gregg A Hancock - Wealth Advisor Fiduciary Services First Midwest Wealth Management 506 15th Street Moline, IL 61265 Financial Planning Gregg.hancock@firstmidwest.com (o) 309-797-7622 (c) 563-940-8998 Retirement Plan Services Fee Only Wealth Management is offered through First Midwest Bank. Most wealth management products are not 7 FDIC insured.
Editor's Notes
- #7 Financial planners may receive fees, commissions, or both, in four possible ways. This distinction is important to you, because it may affect your cost and the service you receive. "Fee-only" planners charge a fee for their services, but don't receive a commission when you purchase a product. The advantage is that you may get more objective advice. The disadvantage is that the planner may have little incentive to make sure you follow through by implementing the plan, and may lack the ability to coordinate all facets of its implementation.He may also be inexperienced when it comes to actually implementing the plan-dealing knowledgeably with insurance companies, stock brokerages, etc. And you will probably end up paying the product company an additional fee for implementation -- after already paying the fee-only planner. In essence, you're paying twice for the same service."Fee-based" planners charge you a fee that's enough to fairly compensate for planning work, but they may also get a commission on any products you purchase. By law, their "engagement letter" must disclose conflicts of interest and all terms relating to the engagement, allowing you five business days for a full refund of any fees paid. The disadvantage here is that you will need to be sure you understand fees, loads, charges, and expenses of any recommendations offered. The advantages will probably include increased convenience, one-stop service, broader competencies, and increased influence when it comes to representing your needs with major financial institutions. And you'll probably not be paying double when it comes to implementing recommended product purchases: both a fee to the planner for oversight and a commission to the product salesperson."Fee-plus-commission" planners sometimes charge a fee, but most of their compensation comes from commissions. So, what's the difference between a "fee-based" planner and a "fee-plus-commission" planner? In my experience, the fee-based planner initiates virtually every engagement by charging a fee significant enough to provide a comprehensive financial plan. By contrast, the "fee-plus-commission" planner is set up to charge fees, but seldom does it unless you insist on paying him a fee -- 99 percent of the time he is commission only. As a result, although he will suggest a comprehensive engagement, he must be focused more on insurance and investment products."Commission-only" planners don't charge any fees; their only pay is commission from the products you purchase. (Remember, even most commission levels are government-regulated to balance consumer and industry interests.) Commission-only "planners" are seldom planners at all, but are focused solely on the products they sell. (Having said that, I have usually found very competent, thorough, and ethical CLUs, ChFCs and CFPs.)