Questions to ask Financial Advisors we interview before retiring (move, state, separate)

[Sunaimer]

We have had financial advisors through our employment regarding our 401k plan. Most of our 401k money is in a “growth” plan invested through Morgan Stanley. We plan on retiring within five years and would like to interview three different financial advisors that are not connected to our employment for an outside opinion. Do you have any good questions to ask potential financial advisors? Thank you.

[leastprime]

A lot has to do with where you are at financially and where you want to go financially.

[johngolf]

Look for a fee based adviser. One you pay to evaluate your situation and draw up a plan for you but one that has nothing to sell you. As an example, they may suggest several large cap companies, several mutual funds, etc. for you to invest in as part of the plan, but they do not sell them.

Although I do not believe in life insurance in some situations it might be in the mix. A fee based adviser might suggest a particular type and amount but they will give you the names of several companies selling such a product but, again, they will not be selling it to you.

Years back insurance companies called their insurance sales people in and gave them a brief course on investments and some specific products to sell. Then they gave them new business cards that said Financial Adviser but told the they still had to sell insurance or be fired. Be doubly wary of any adviser that works for an insurance company.

[mathjak107]

as always , there is my caveat .

be careful of fee only advisers . many , especially the ones i have seen , are only fee only because they lack the credentials and training in other products and strategies and are way behind the times . if they had the credentials and training they may not still be fee only .

there is so much new research and myth dispelling today that old school teaching on a lot of things is now wrong .

so don't think because an adviser is fee only that you are getting a bargain . . just do your homework and don't buy anything not in your best interest . you can pay a commissioned adviser if they are the best you can find . i found a commissioned guy that was very well trained .

[SportyandMisty]

Get a profile of the advisor's other clients. Are you in the sweet spot or an outlier? For example, if the advisor has 100 clients and the average wealth of the clients is, say, $25 Million with a few in the $100 Million range and one or two in the $400,000 range... take that into account. Personally I'd look for an advisor who has clients that look like me, as that advisor would have more experience dealing with the issues I face rather than the issues that might not be applicable to me.

I'd also look for someone with a solid background in the underlying academics of wealth management. You don't need Eugene Fama, but it is important to have someone who understands the mathematics of portfolio optimization, risk management, asset valuation etc and its limitations -- someone who has a solid academic background from a good business school coupled with quite a bit of time working for a reputable firm. I'm not interested in someone who just has a subscription to some 3rd party software tool & mindlessly plugs in a handful of numbers to spit out a chart. Any idiot can can enter 5 pieces of information into Firecalc.

Finally, ahead of time, you need to determine what types of services you really want to buy. Do you want an integrated firm that offers a broad range of services? Do you want estate planning services? Tax advisory services? Tax form preparation services? Insurance services? Or do you just want a one-time asset allocation plan?

[mathjak107]

all great points , because not all advisers do that . ours is part of a brain trust . our advisers dad is an estate /elder law attorney and they have an accountant they work with .

of course all fees for the others are separate

[pullin2]

I like to ask two questions when a FA is wanting me to invest with him.


1. "What should I do with my investments/401K if the stock market drops again like in 08?"
Usually, the answer is: "Stay the course, don't try to time the market. Ride it out."


My next question:
2. "Is that what you did?"


Frequently this is followed by a long silence.

[mathjak107]

if you get the long silence move on .if an adviser can't exhibit good investor behavior themselves who wants them . the one that says add to your holdings and rebalance is the better choice .

[jghorton]

"What do you recommend that I buy from someone other than you or your firm?"

[Suevee]

Probably no brainer but make sure they have a fiduciary responsibility to you. And really understand the goals you want to meet and how the advisor plans to achieve them.