You hunkered down during the global financial crisis, wary of taking action while your investment account values plummeted. As the markets and your investments have recovered, you have a feeling you should reevaluate your current investment approach and financial advisor, if you have one, with the idea that you might want to make some changes. Where do you begin?
Choosing an advisor
You have two basic types of professional financial advisors to choose from: a retail broker or an independent, fee-only advisor. A retail broker, also known as a stock broker, is compensated either by his or her employer or a third party for selling investment products to you.
Unlike a retail broker, an independent, fee-only advisor must always, by law, act as your fiduciary – meaning he or she must at all times put your interests first. An independent, fee-only advisor receives no commissions or other compensation from his or her employer or a third party for selling investments to you or for moving your money between investments. Such an advisor is compensated only by the fees he or she charges clients for services rendered. The advisor will charge you either a percentage of the amount of money being managed for you or an hourly rate. He or she will be able to focus entirely on offering you objective and unbiased guidance based on your unique objectives, time horizon and risk tolerance. Grand Wealth Management serves clients on an independent, fee-only basis.
Questions to ask a potential advisor
In addition to finding out how a prospective financial advisor is compensated, here are questions to ask anyone whom you're considering hiring.
1. What services do you offer?
While some advisors offer only asset management, others, like Grand Wealth Management, offer a more comprehensive set of services that include not just asset management but also guidance on creating a plan to achieve all your financial goals.
2. What's your investment philosophy?
Ask the advisor to describe the philosophy behind his or her financial advice and asset management decisions. If the advisor either doesn't seem to have clearly defined views or fails to articulate them well, or if his or her views seem counter to your own, you should probably look for a different advisor.
3. Please talk about your education, credentials and experience
Find out where the advisor went to school and what he or she studied. Also ask about credentials; it's best to go with someone who has earned one or more professional designations. The most common credentials are Personal Financial Specialist (PFS), Certified Financial Planner™ (CFP®), Chartered Financial Consultant® (ChFC®) and Chartered Financial Analyst® (CFA®).
Ask how long the advisor has been in practice and the numbers and types of clients he or she has served. You can request references if you like, and if you do, contact the individuals and inquire about their level of satisfaction with the advisor's services.
4. What business structure do you work under?
Independent, fee-only advisors work either as solo practitioners, in small professional partnerships or in large organizations. From the client's standpoint, each business structure has its pros and cons, and it pays to understand how an advisor's practice is set up before you sign up for services.
Avoid hitches when transferring from one brokerage firm to another
Once you’ve narrowed your search, interviewed potential advisors and made your selection, your accounts may be transferred to a new custodian, often a brokerage firm. In the past, this process could be lengthy and frustrating for investors.
Today, however, most account transfers between brokerage firms are handled electronically using the Automated Customer Account Transfer Service (ACATS) system, which can speed up the process. If your transfer is made through ACATS, the entire process should take about six days from the time your new firm enters your information into the ACATS system. There may be snags that will cause delays, but as explained below, there are a few things you or your new advisor can do to prevent such issues from cropping up.
Know the types of securities that may not be transferred
If your transfer request includes any securities that may not be transferred, there may be a delay in completing your transaction. Non-transferable securities include:
- Securities sold exclusively by your old brokerage firm
- Mutual funds or money market funds not available at the new firm
- Limited partnerships that are private placements
- Bankrupt securities
Use the correct form and fill it out carefully
To transfer an account to a new brokerage firm, you must use a form supplied by that organization. Some firms let you use one form for all transfers; others provide different forms depending on the type of account you're transferring. Your new advisor should prepare the forms for your signature and submit them on your behalf.
When filling out the transfer form, be sure to provide information exactly as it appears on your old account. You must attach a copy of your most recent account statement to the transfer form.
Try not to change the account type at the time of the transfer, as this could cause a delay. For example, if you're transferring an IRA from your old firm, it should remain an IRA in the new firm. Try to keep the account owner the same, too. Otherwise you may need to provide documents that prove an ownership change, such as a marriage certificate, divorce decree or death certificate.
Stay on top of the transfer
You or your new advisor should stay in contact with your old and new brokerage firms to make sure the transfer is progressing smoothly. For example, ask the old firm if it received the transfer request and make sure the new firm received the transfer form.
A little extra effort will be worth your while
Choosing a new financial advisor or transferring assets to a new brokerage firm will require some legwork on your part. However, the effort you put into the change could lead you to a financial plan that better suits your needs and preferences.