Answers in Selecting an Advisor

Paula, You have to correct this information yourself by updating the U4 through the IARD system. We had the same problem, submitted a corrected filing and are now waiting for Brightscope to reflect the changes. Brightscope is a downstream aggregator and presenter of information so they can't fix the problem. I hope this helps.

Is it worth it to hire a financial advisor? The answer depends on your perspective and what you are looking for. First of all, the term “Financial Advisor” is used by a great many people from insurance agents to stock brokers to Registered Investment Advisors (RIA). I often use the analogy of a cattle ranch. The owner – you – own the ranch and you hire me – an RIA - as the foreman. It’s my job to run the place, hire the cowhands, assign the jobs and supervise the work. I report to you and as long as I do my job to your satisfaction I stay on. If I fail, or we don’t get along you have the right to fire me and find another foreman. You are concerned about the bottom line and leave the details to me. That kind of an arrangement usually means that both the ranch owner and the ranch foreman prosper because they are both focused on the same goal. Is it worth it? Well, here’s one answer: most wealthy individuals and institutions hire advisors because they know it’s the smart thing to do.

I see all these "Yes" answers above, but I disagree somewhat. All my portfolios are customized for the unique circumstances of the individual client. What may be appropriate for me, may not be for them. For example, a client wanting primarily income and safety will largely have different investments than mine because my profile is significantly different. I also would not usually buy tax free bonds for someone in a very low tax bracket because they can usually get a higher net return from a taxable bond; however I certainly would buy munis for myself because I am in a high tax bracket. That said, there is often some degree of overlap and where there is the funds should be the same. Also note that a share class may be different, depending on whether the account meets the minimum for a lower expense share class of a no-load fund. Or, a small UGMA account with $1,000 to invest in a fund will not usually find it worth paying a $25 fee to invest in an institutional share class like an account with $25,000 to invest would because the fee, while small, works out to 2.5% of the $1,000 compared to 0.1% of the $25,000.The main thing to remember is this: as an RIA, I have a fiduciary duty to my client to always act in their best interest. That means putting them in the best investments and lowest cost shares classes for their individual profile.

It depends on who you pick and why. Advisers vary a great deal in their competence, performance, service, and how well they work with you. Look for an experienced fee-only adviser because their pay does not vary with what they recommend, nor do they get commissions or contest awards that often skew objectivity. Their pay rises when your account increases, which is a pretty good setup. Interview several and pay no attention to the size of their office or how persuasive they are. You are looking for an experienced, service-minded person that takes a genuine interest in you. A good adviser may pay for his fee with getting you better performance but the main reasons to hire one are: greater objectivity, experience, expertise, time savings for you, and vetting of other good advisers like CPAs, attorneys, and insurance agents. Again, you don't want someone that appears strongly sales-oriented because those other relationships may be based not on how good they are but how many referrals they generate. Shop very carefully, because hopefully you are starting a very long-term relationship that impacts your financial well-being.

Carny - I agree with Rich in that it primarily comes down to time. If you don't have the time to educate yourself AND maintain the plan you set, then you should probably consider partnering with a financial advisor.

You have to decide what's the most effective use of your time. I take my car to a mechanic because i don't have the time or desire to learn how to fix it myself. If i enjoyed working on cars and developed some decent experience, then it would be a different story.

The other important variable to consider is accountability (see "The Behavior Gap" by Carl Richards"). If you find yourself justifying bad investment habits or losses (ie Sold Low, Bought High because everyone else did too), then you could probably benefit from a "devil's advocate" who can tell you the facts instead of what you want to hear.

If you do choose to partner with a financial advisor, look for one who doesn't make you "feel good" all the time about your investments. It's an easy cop out for an advisor to tell you what you want to hear rather than what would benefit you the most. That's where fee-only advisors come in handy because they are financially motivated to tell you what would benefit you (and your account) the most.

Feel free to browse my website (www.appliedcapital.com) or follow me on twitter (@BUBearBrad) for helpful hints I provide my clients and friends.

Yes, I invest in all of the same investments and investment strategies that I recommend to my clients (although our allocations will differ).My clients appreciate that "I eat my own cooking" and that my personal investments are performing in line with theirs.

My answer is simple... If you don't have the time, desire and expertise to effectively manage your financial affairs, then the value you receive from working with a "good, experienced" financial advisor will far exceed the cost. Do you know a lot about investments, asset allocation, tax planning, estate planning or retirement plan options? Are you knowledgeable about the latest changes in tax laws and how they will affect your investments, estate planning, etc. Do you know how to utilize specific life insurance products for tax-free wealth accumulation? A good financial advisor will know all of this and more.

Carny,

Most people can benefit from professional guidance when they venture into the complex and confusing world of managing their financial affairs. A financial advisor will be able to assess your risk tolerance, analyze your resources and current asset allocation, take into account your tax liability, and make investment recommendations in the form of a written financial plan that will help you to achieve your goals. The plan may help ensure that your current and future assets are used to their best advantage given your current financial situation and your financial goals. Some investors find that they don’t have the time, energy or talent to research and identify stocks for their portfolio, much less manage their money effectively. Their needs go beyond the scope of a stock broker - they may need the services of a qualified financial adviser.

A good financial adviser will work with you to develop a game plan that fits your financial circumstances and tailors a plan to accomplish your goals. Some people find that they are more comfortable doing their “own thing” and don’t want to spend the money a good adviser may cost. On the other hand, many people gladly turn over the details of developing a financial plan to an expert.

Most financial advisers want to look at your whole financial picture – all your income and liabilities. They want a complete picture of where you are financially so they can draw a map from where you are to where you want to go. Here are some of the benefits of using a financial adviser:

• The Big Picture – A financial adviser will develop a comprehensive profile of your financial status. This profile will identify areas of strengths and weakness.

• An Unemotional Assessment – The financial adviser will give you an unemotional assessment of what needs to be done. Money is an emotional topic for many people, which often leads to bad decisions.

• Allocate Resources – It is likely you have competing priorities, such as sending the kids to college while building a retirement fund. A financial adviser can help you allocate resources so both goals receive the appropriate share of dollars.

• Minimize Taxes – Most investment decisions carry some type of short or long-term tax implication. Your adviser can help you shape your investments in a manner that keeps taxes to a minimum and more of your dollars invested.

• Estate Planning – Careful planning will help ensure that your estate passes to loved ones in a manner that protects as much of its value as possible.

Depending of the type of financial adviser you use, you will get some form of financial plan that details the findings of the adviser and provides a blueprint to reach your goals. The plan may include options to reach your goals that involve different levels of commitment on your part

Financial advisers come in variety of flavors, each with their strong points. There are three basic ways you compensate financial advisers for their work: fee only, fee and commission or percentage of assets and commission only. In the end, you should choose the adviser you feel will do the best job for you and worry less about the method of compensation.

If you decide to use a professional financial adviser, the most important considerations are the person’s integrity and your relationship. Method of compensation and other factors are secondary to establishing a level of trust that will allow you to work with the adviser in confidence.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

I would recommend a book titled "The Investment Answer" by Goldie and Murray. Not only do they immediately answer the question you ask in a very direct way, the book also will add value in shaping some investment ideas that I believe many advisors on this forum will agree with. The book is a quick 80 page read and you can order it on Amazon for around $6 with shipping. I hope this helps.

Hi Carny! As a consumer, you will want to determine what you want to accomplish by working with an advisor. As Alexander referenced, different advisors do different things. A planner can help you with budgeting, determining insurance needs and retirement planning. A wealth manager may manage your investments. Some CPAs hold additional personal financial planning designations as well. It can be a challenge to choose as there are many different labels in our industry. Look past the title to what the advisor actually does.

After you decide what you are looking for, then you can determine the type of minimum balances and fee structures work best for you. Some advisors charge fees up front for advice, some charge commissions based on the product purchased, and some charge by the dollar amount of assets they manage.

Your question: is it worth it? I believe everyone can use the services of a financial planner. Planners can help you "find" money in your budget, select assets that are appropriate for your investing comfort level, and help provide appropriate insurance coverage. Everyone can guess at this information, but a planner will help educate you and help execute the plans that can make your goals successful. You can't put a price on that.

There are a few items that you as a plan administrator should be aware of, and evaluate periodically, and it is not only the financial stability of your 401(k) provider--especially if they offer bundled services.

1) Are there any conflicts of interest? 2) Are fees that are charged to the employees accounts reasonable & necessary? 3) Are the funds being offered in the plan the better ones out there?

Remember the fiduciary rules have changed recently, and lawsuits can be brought up against plan sponsors.

Off the top of my head - The things we would look for are evidence of a SAS70 and/or CEFEX certification, where the checks and balances are, is the money held at a reputable custodian, how are the investments registered and how has responsibility for monitoring and selecting them, conflicts of interest, distribution and investment processes and procedures, how each entity in the turnkey approach is getting paid, who has access to be able to give instructions on the plan and to what discretionary extent, business continuity procedures, limitations of their contract, services to be provided in their contract, and so on. I do agree that it's very helpful to have a consultant in these situations though!

www.FiduciaRetirement.com

In the 401k world, your advisor is a fiduciary or co-fiduciary with an advisory agreement under section 3(38) for ERISA-qualified plans. When an employer hires an ERISA § 3(38) investment adviser, they share responsibility/liability for the investment management and compliance process with the adviser. Section 3(38) would explicitly be included in the language in the investment advisory agreement.

I agree with Don. To expand on the fiduciary role, have them present on their fiduciary standards and processes and how their fiduciary system has helped clients mitigate regulatory risk in addition to investment risk. Asking for case studies or whitepapers can give you a clearer picture as well.