Five Questions to Ask Before Hiring a Wealth Management Advisor in Seattle
Have you been investigating wealth management advisors in Seattle? Choosing the right wealth management advisor is one of the most important financial decisions you will ever make. Here are five questions to ask before you settle on the right wealth management advisor for you.
Did you seek out the financial advisor or did the financial advisor seek out you?
Most people seek out wealth management advisors only after they come into money. There is a huge difference between the wealth management advisor who offers their services on a cold call and the wealth management advisor you find through your own due diligence.
There is more information about you available online than you might ever imagine. Dishonest financial advisors may find you through phishing schemes, hacking your personal data so they can pose as the perfect advisor for your new-found wealth.
Stick to financial advisors recommended to you by trusted friends who have at least five years of experience with them, and financial advisors you find after your own diligent search.
What does the advisor’s typical client look like?
You don’t want a financial advisor who specializes in wealth management for the young owners of highly successful tech startups if you are looking for places to put your retirement savings, and vice versa.
Misalignment of goals can cause the advisor to give you bad advice, or simply to ignore you because they are more interested in other clients. You don’t want the advisor to relegate your account to the most junior member of their team. You want their ideal customer to be someone a lot like you. You want to be able to take advantage of synergies that arise from their serving other customers like you.
What’s the advisor’s professional background?
Do a broker check. This free online tool from the Financial Industry Regulatory Authority (FINRA) helps you confirm a wealth manager’s credentials. You should also expect your wealth manager to be a registered investment advisor, or RIA, Check their credentials before you hire them.
Is the financial advisor a broker-dealer?
Hiring a financial advisor who is associated with a brokerage can save on the costs of trading stocks. But you should also establish your investment strategy with your advisor to make sure your financial advisor is not recommending stocks just to make a fee on each purchase or sale.
Does the financial advisor want you to invest in their mutual fund?
There are more mutual funds in the United States than actively traded stocks. That’s because managing a mutual fund is very profitable — for the fund manager.
An article in Forbes points out that mutual funds have to keep a significant part of your funds in cash, to be able to pay investors when they redeem their shares. This cash can’t be invested when the market presents investment opportunities. It’s also important to keep in mind that the annual fees for a mutual fund in a non-taxable account is usually 3 percent a year, or 4 percent a year in a taxable account. That’s because the expense ratio is not the only fee investors pay.
You will also want to know if the financial advisor receives any third-party compensation for recommending a particular investment. And you will want to know that the advisor keeps your funds in a third-party custodial account, like Schwab, to be sure you aren’t dealing with another Bernie Madoff.
Does the financial advisor offer any services other than picking investments?
Financial advisors can do a lot more than help you choose the right investments. They can do Social Security analysis. They can help with estate planning. Let every potential money manager know what you need so you can make the right match between your goals and their services.