At P&A, we define a money-in-motion event to include the sale of a business, a retirement, an inheritance, or seeking a new advisor. If you’re going through one of these major life transitions and recognize a need for sound financial advice, here are some important questions to ask a potential advisor. (For an apples-to-apples comparison of advisor’s answers to standard questions, be sure to look up a firm’s Form CRS. P&A’s Form CRS lives here.)
1. How are you compensated?
The majority of financial advisors today are compensated at least in part by selling financial products to their clients. Commissions, transaction charges, sales loads, revenue sharing…the list goes on and on as to how these advisors can be paid. If you see “securities offered through…Member SIPC, FINRA” at the bottom of an advisor’s website, it means they are paid by selling you products, which introduces more conflicts of interest. (P&A is a fee-only advisor, and we don’t sell any financial products or earn commissions, etc.)
2. Are you a fiduciary?
A fiduciary is obligated to put their clients’ best interests first. This is the highest standard of care in our industry. Unfortunately, not all advisors are fiduciaries. Some advisors are held to this standard only part of the time, i.e. when offering advice, but not when implementing the advice. Talk about confusing. A full-time fiduciary doesn’t sell any financial products, which distinguishes them from other advisors. (P&A is a full-time fiduciary.)
3. Who is your typical or ideal client?
You want to ensure that a potential financial advisor has experience and expertise in helping people just like you. For example, business sales involve planning for the impact of taxes, changes to your estate plan, charitable and family gifting, and often re-creating an income stream from the proceeds. While selecting investments for your portfolio is important, that just scratches the surface of what a financial advisor or firm should be able to offer you.
4. What is your minimum relationship size?
Many advisors will list their minimum relationship size on their website or in their marketing materials. This goes along with the previous question in determining whether you are a good fit for a financial advisory firm, and vice versa. (At P&A, our minimum relationship size is $1 million in investable assets. If you’re close, or will be, let’s talk.)
5. How often will you communicate with me?
Lack of communication is one of the most common reasons cited for why a client leaves an advisor. Make sure your expectations of client communications are in line with the firm you’re interviewing. Also consider your preferred method of communicating (in-person, virtual, phone, email) and whether an advisor will accommodate you.
6. Have you or anyone on your team been cited for disciplinary reasons?
You can look up the disciplinary record of any advisor online. Click here for SEC-registered investment advisors and click here for FINRA-regulated brokers and advisors. In general, we’d be leery of working with an advisor who has a history of arbitration cases or client complaints against them. (At P&A, none of our advisors or team members — or our firm as a whole — has a disciplinary history with any of the financial regulators.)
7. Who holds my investment assets and cash?
Bernie Madoff “made off” with his clients’ money because he was the custodian of these assets. There’s no better example of the need for an independent, third-party custodian to hold your investments. (At P&A, this role is filled by Charles Schwab & Co., a well-regarded financial institution founded in 1971. Schwab holds your assets and all checks are made out to Charles Schwab & Co., not to Pittenger & Anderson.)
8. What is your investing philosophy?
Any investment manager should have a theory of how markets work and why they invest their clients’ money the way they do. More importantly, the advisor should eat their own cooking. Here’s what we believe and how we behave:
- Simple, transparent portfolios: We use liquid, easy-to-understand investments that can be efficiently bought and sold.
- Focus on what we can control: Markets are unpredictable, but certain factors remain within our control, including expenses, processes, and portfolio construction.
- Embrace volatility: Short-term volatility is the price investors must pay to enjoy the long-term compounding benefits of the stock market.
- Stay fully invested and diversified: We believe consistently participating in the market is more effective than attempting to time it.
- Aligned with your best interests: As a fee-only fiduciary, our advice is not influenced by commissions, proprietary products, or sales incentives.
- We eat our own cooking: At P&A, we invest our personal and retirement money using a similar overall philosophy we employ for our clients.
9. How will I benefit by working with your firm?
In addition to professional and ongoing investment management, you’ll likely want an advisor who helps you with tax-efficiency, charitable giving strategies, Medicare enrollment and Part D reviews, Social Security maximization, stress testing your financial plan, analyzing any life insurance policies or annuities, understanding the impact of IRMAA, and more.
10. What is your succession plan?
Before you hire an advisor, you’ll want to understand who will take care of your investments should something happen to them. Is the firm a one-person show or is there a team of professionals to ensure your monies are taken care of for decades to come? (At P&A, we have an experienced team of 16 professionals who all work on your behalf.)
If you’re going through a money-in-motion event and you’d like to learn more about how Pittenger & Anderson can guide you on your journey, please connect with us here.
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Pittenger & Anderson, Inc. makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.
Pittenger & Anderson, Inc. does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Additionally, the information presented here is not intended to be a recommendation to buy or sell any specific security. To learn more about our firm and investment approach, check out our Form ADV.
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