It seems like everyone claims to provide comprehensive financial advice these days. You can’t go twenty minutes without seeing a commercial touting ZXY Comprehensive Wealth Management Firm. To help evaluate the good from the bad from the ugly, pose these questions to your existing financial advisor or to the advisors you are interviewing. After just five questions (and the bonus question if you even get that far), you’ll be able to eliminate 90% of the advisors you interview.
1. “What professional designation(s), education, and experience qualify you to provide me with comprehensive wealth management advice?"
What you want to hear:
•"I’m a Certified Financial PlannerTM practitioner that goes above and beyond the continuing education that is required. Additionally, based on initial understanding of your situation, I have hands on experience working with clients in similar circumstances.”
•"I’m not sure I can help you yet. Tell me more about your situation and needs.”
What you don’t want to hear:
•"I’ve been doing this for x years, I don’t need a professional designation.”
Why is this bad? Experience is great, but regulations and advanced planning techniques are constantly changing. You need someone who has cutting edge information working for you.
•"I’m an NASD Series 7 registered representative.”
Why is this bad? Passing the NASD Series 7 test does not even come close to preparing an advisor to provide comprehensive financial planning.
•"If you have investment assets I can help you.”
Why is this bad? If you are looking for a comprehensive finacial advisor, he or she needs to know your current situation, needs, and objectives before knowing if you are going to be a good fit for the firm.
2. “How are you compensated?"
What you want to hear:
•"I receive a flat retainer for my services.”
•"I charge based on a flat retainer and an assets under management fee.”
What you don’t want to hear:
•"You don’t need to pay me directly, I will earn my compensation from the investments we choose.”
Why is this bad? The investments that pay the most may dictate what the advisor recommends rather than what you really need.
•"From a percentage of the assets that I manage for you.”
Why is this bad? If the advisor is compensated based on the value of your assets he manages, you may not get objective advice regarding taking money out of his control to pay off your mortgage or invest in an apartment building.
•"I earn a commission from the products I sell you.”
Why is this bad? The advisor’s advice is directly tied to his/her compensation and not necessarily your needs.
•"I am fee-based.”
Bottom Line: Your advisor’s compensation should not be influenced by his advice.
3. “Do you accept or provide referral fees to anyone?"
What you want to hear:
•“No.”
What you don’t want to hear:
•“Yes."
Why is this bad? Your well-being may play second fiddle to the advisor’s compensation.
Your dentist tells you that you need a root canal and that he has the perfect endodontist for you. Once you recover from the news, you ask your dentist if she will receive a referral fee. If she says she will, won’t you wonder if this endodontist is really the best one for the job? Maybe he’s botched his last 15 root canals but pays the highest referral fee.
Bottom Line: Referral fees benefit the referrer but can hurt you.
4. “How important is having a written financial plan?"
What you want to hear:
•"Very important."
What you don’t want to hear:
•"You really don’t need one.”
Why is this bad? If they don’t do a financial plan, they cannot provide comprehensive financial planning advice.
Bottom Line: A written financial plan becomes your roadmap--summarizing your current financial situation, addressing values-based goals and objectives, and charting a course to achieve those goals. This is the document that drives the relationship between you and your advisor. It identifies what is important to you and how you will accomplish your goals.
5. “Do you recommend I have an IPS?"
What you want to hear:
•"Absolutely. In fact, before we recommend any investment we will first help you design an IPS."
What you don’t want to hear:
•"What’s an IPS?"
Why is this bad? Obviously, if the advisor hasn’t even heard of an IPS, he won’t be able to help you create one.
Where the financial plan addresses cash flow needs, income tax issues, budgeting, life insurance, and estate planning issues, an IPS (Investment Policy Statement) is a written document that focuses exclusively on investments. The purpose of the IPS is to establish guidelines for investing that are appropriate for your objectives as well as the realities of the financial markets.
Bottom Line: A written IPS provides a documented process for investing that answers who, what, how, why, when, and where and prevents ad hoc changes to one’s portfolio based on emotion or hunches.

To ensure you are protected and your goals are achieved, your professional team must be working in concert having the success of your goals as its single mission