One
of the most important issues to consider when hiring an investment
advisor is the relationship you hope to establish.
A strong affiliation based on communication and trust is
critical to the long-term success of your investment relationship.
While it is your money that the advisor will invest, there
are specific items for which each of you is responsible.
THE CLIENTS RESPONSIBILITY
The Facts
To properly manage a relationship with your advisor, it is
important that you give this individual the ingredients
necessary to manage your account. The assets you are placing
under management do not exist in a vacuum. You should provide
a full disclosure of your financial assets and obligations
and let your advisor know how they currently fit into your
financial goals and objectives. Will the advisor handle
all of your assets, or a portion of them? What are the
assets for: retirement, education, or general long-term
growth? When will you need the assets?
You and your advisor should also discuss your long and short-term
needs. Do you have any income requirements now or in the
near future? What is your tolerance for risk? What return
do you hope to achieve? What fees will you incur over a given
period of time?
Armed with the facts, an investment advisor should be able
to provide you with a customized plan for managing your assets.
Expectations
An upfront discussion with your advisor will prevent misunderstandings
down the road. How often would you like to meet with the
advisor? What written reports and related materials would
you like to see? How often would you like to see them?
Keep in mind that most advisors prepare pre-formatted reports
which are sent en masse. If you would like to see additional
or customized information, you should discuss this need
with your advisor. Like any service, investment advisors
balance a client's requests for service with
account management time constraints. Flexibility will vary
with individual firms. Deciding upon and voicing what is
comfortable for you is a key piece of information for your
advisor and will help determine if your needs can be met.
Other Issues
While performance is important, it is not the only issue
you should focus on when reviewing the relationship with
your investment advisor. You should:
- Be honest and realistic with your goals and expectations;
- Understand and be comfortable with you investment
advisor and his or her investment style; and
- Monitor your advisor's performance on a regular basis
and discuss your portfolio's results with him or her.
Look
at the results relative to his or her peers as well
as to the market environment in which they occurred.
Use the stock/quote and chart box at MsFinancialSavvy.com
to get a snapshot of your stock or mutual funds performance
over several time slots. Be sure you thoroughly understand
our stock/quote and chart box by first reading the tutorial.
Read our stocks 101 and mutual funds 101 tutorials so you
will have a basic understanding of how investments work and
you can understand where to start with your advisor. Get
information on selecting a broker from both the securities
and exchange commission, and the national association of
securities dealers.
Lois Center-Shabazz is the founder of MsFinancialSavvy.com and author of the
3-time award-winning personal finance book, Let's Get Financial Savvy! ISBN
#0971979502.
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