We ask a lot of questions. Managing money requires humility and punishes over-confidence. If there is one word that best summarizes what built our investment business, it would be this: curious. We are always curious, and never convinced.
10 Questions for an Investor to Ask a Financial Advisor
Most of our questions are inside the markets and companies, so that we can make money for our clients. But, we also like to humbly survey clients about how we can improve any small thing in our own business -- for them.
As our thanks for their candid feedback, we wanted to provide an update of one of the most requested posts we have ever shared, many years ago. A few of our clients kindly suggested we help some of their friends who did not know what questions to ask when interviewing potential financial advisors. We’ll also tackle that further below in this post.
The Direct Feedback From Our Clients
This old grainy black and white photo hangs on the wall of our entry hall. These are the “Curbstone Brokers” who did not fit Wall Street’s customs in any way and did not accept their backroom traditions. So, they worked outside on the curb in all weather. They asked questions and conducted their business based on trust. Their open-air bids and offers system was so successful they later moved inside and became known as the American Stock Exchange.
“Mike and Ryan interviewed us as much as we interviewed them, to make sure all of our families were a good fit.”
This comment made us want to share this list below, in return for all the input we received, including - “I didn’t know what questions to ask.”
Questions You Should Ask a Financial Advisor
Now for the 10 questions we would encourage you to ask any advisor before you consider hiring them.
Or, if you already have an advisor, do not hesitate to ask for the first time. Be unapologetically direct and persistent. That is our best advice for somebody looking to hire anybody for anything. You deserve clear answers to important questions. If you do not know somebody really well, the markets are an expensive place to find out.
1. Can I see the Investment Plan of your oldest and youngest client?
2. Can I talk to a client who started with you before either of the last two 50% market crashes?
3. Do you have your own Investment Plan, in writing, and how much longer are you wanting to work?
4. Can you explain your specific sell disciplines for each investment, before you are wrong?
5. If you outsource portfolio management, can you explain the manager’s sell disciplines, or how you will know when they are wrong? And, when did you last speak to the portfolio managers you hired for your clients?
6. What is your proactive communication schedule with your clients?
7. In your entire book of clients, what is the total number of different underlying investments that you are trying to manage?
8. If I called two clients who started 5 and 15 years ago how would their holdings differ from each other and mine if I opened an account today, specifically?
9. Have you ever been paid a bonus to change investment firms? If so, what bonus did clients receive if all their account transfers were completed?
Last but not least, and in fact what will prove most revealing of all…
10. Exactly how and where is all of your own personal money invested?
Any of this, and more, should be fair game to ask about. If you are considering trusting somebody with your hard-earned savings, your family is counting on you to ask really good questions in order to carefully consider who is worthy of your long-term trust.
“An investor who has all the answers doesn’t even understand the questions.” -- Sir John Templeton
We have a client in his 80’s who periodically wants to stop by for a cup of coffee for only one reason he honestly shares: “I just need to see how healthy you look; you gotta outlast me.” Some may think that’s too personal, but he is right! And, this business IS personal.
One client survey answer most disappointing to our wives (but accurate) was “I hired you because I knew I’d never run into you at a social event!” Some may be offended by that. He followed up by saying, “You’d probably be reading instead.” He knows us well!
Many advisors are incredible extroverts and socially charming, and those are wonderful qualities. But, so is curiosity.
“When people show you who they are, believe them.” -- Maya Angelou
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