Need help deciding on a financial planner?

Here are some questions you should ask and consider when performing due diligence in finding the most qualified investment professional to manage your investments. Often, investors choose an investment management firm based on name recognition. That just means they are good at marketing, not necessarily investment management. Checking an advisor's record through the Securities and Exchange Commission (SEC) or the state's regulation board and contacting references will definitely fare you well.

What are your qualifications? (What degree(s) and licenses do they have? How does that qualify them to manage your investments?)

What services do you offer? (For example, Certified Financial Planners, or CFPs, are not qualified to sell insurance or securities without the proper licenses or to give investment advice without being registered with the SEC or state regulators.)

What returns do you estimate for my investments? The estimates should be calculated after fees, inflation, and taxes. This more realistic number will help you see past the big talk a salesperson might give you to cover up the massive fees they plan to add to the back end of your investment management account(s). A realistic figure for you to keep in mind may be around 3%, depending on your risk tolerance. You can also determine the break-even ratio, or the minimum rate of return your account(s) must earn just to cover transaction costs. Ideally, you would monitor this quarterly to insure that you aren't losing money from a poorly qualified manager or salesperson.

Do you provide your clients with their account (not fund) performance? On what basis? This will help you get an idea of what their customer service will be like, and how they manage their accounts (do they invest only in basic funds? If so, you might be wasting your money).

Do you own the same investments as your clients (when appropriate with respect to risk)?

What is your approach to financial planning? What types of clients and financial situations do you typically manage? Make sure their investment strategies align with your needs (not overly conservative or too risky for your comfort level). Some investment managers require an investor has a minimum net worth before offering certain services.

Will you be the only person working with me? Make sure you get a list of everyone who will be working on your account(s) and their background experience and qualifications.

How will I pay for your services? Different modes of compensation may include: hourly fees, flat fees, a percentage of your assets, commissions paid by a third party from the products sold to you, or a combination of fees and commissions. (Cornerstone is compensated by a minimal percentage of your assets OR an hourly fee, depending on the service you receive.)

Could you give me an estimate in dollars of how much I will pay for your services? This can be a good way for you to investigate any hidden fees (make sure you look at any fund management fees that can be tacked on top of account management fees).

Are there surrender charges associated with changing my mind and selling, or closing my account? This question is very important, as it will help you determine whether or not dealing with that investment professional with be more of a hassle than it's worth.

Could anyone besides me benefit from your recommendations? This will also help you discover any biased decisions that may me made on your account, which might benefit the financial advisor more than it would benefit your investments. For example, a broker dealer representative that sells specific mutual funds in order to make commissions off of those specific products.

Have you ever been convicted for committing any unethical or unlawful actions in your professional career?

And finally, make sure you keep all contracts and written agreements in a file for your future reference.

You can also use the Securities and Exchange Commission (SEC) as a resource: What you need to know before choosing an Investment Adviser. If you have any other questions or concerns or are interested in getting started setting up an account with Cornerstone, please contact us.