How To Select An Advisor:

If you are reading this text, likely you are in need of some degree of financial/investment assistance or advice and are looking for someone capable of helping you. The comments on this page will NOT result in a recommendation of any firm or individual for that role. Our goal is simply to outline for you some considerations that will help you make a wise decision about who helps you with your finances. Selecting an advisor can be tricky. You should choose your financial advisor with as much care and concern as you use when selecting a physician. In other words, you should consider your decision carefully.

Basic Criteria:
The selection of an advisor should take into account professional credentials and education, past performance, reputation in the market place, management style and fee structure. We will address these one at a time.

Summary:

Investment management is a very valuable tool that is available in the marketplace. The topics presented are designed simply to help you make a good decision about its use. The most important thing to remember is that it is YOUR money and YOUR future. You are hiring someone to work with and for you, not the other way around. Take your time. Interview as many firms as you need to, to be comfortable with your decision. Make a good decision, not a quick one.

Professional Credentials:

Financial services professionals have a wide array of professional credentials; certifications, registrations or licenses to pursue in support of their career goals. It is not our position to state that one credential is better than another, however, you will want to be able to verify that the party you are talking with does infact have that credential. Do NOT take someone's word for it. Check it out.

AdvisorRegistry.com does not endorse one credential over another, with one exception. All of the advisors that are listed on our system have a current registration with the proper oversight body, at either the State or Federal level. We chose the Registered Investment Advisor (RIA) status as a base, because, in this manner we know that those on our list have met the stipulated regulatory standard for registration at the appropriate government level, and that all are subject to regulatory oversight and legal sanction. The RIA status does not indicate that the firm or person is a successful advisor, it simply means as mentioned above that the appropriate requirements have been fulfilled.

The type of services you require will impact your decision of who to work with. Financial services professionals often posses more than one certification, license or registration. With that in mind, one should be aware of which credential reflects the advisor's primary focus.

For more detailed information, please check out our professional credentials page.

Past Performance:

Most if not all investment companies or products have a disclaimer "past performance is not a guarantee of future results." This applies equally to investment management professionals. However, a few bellwether indicators should be considered.

1. If an investment manager has not consistently achieved results in keeping with the S&P 500 or comparable indices,rates of return over the last 3 to 5 years - you would want to know why
2. If the last 12 months performance has been especially volatile, there may be indication of internal problems
3. Look for consistent underperformance compared to the market indices
4. Significant client turnover
5. Significant portfolio turnover
6. Recent changes to portfolio management staff

There may very well be good reasons why one or more of these indicatiors seems questionable. However, be sure that any inconsistencies are addressed to your satisfaction.

Professional Reputation:

Like any professional, one lives and dies at least in part by one's reputation. Do not hesitate to inquire about an investment manager's reputation. Your evaluation should not rest soley upon reputation, positive or negative. Your quest should include at least an inquiry with the local Chamber of Commerce and Better Business Bureau. Keep in mind that a positive reputation does not always indicate good performance and that a negative report may simply be the result of a personality conflict between the advisor or firm. If however, you get consistent negative reports, you should inquire with the appropriate regulatory bodies, for there may be more to evaluate.

Management Style:

When evaluating investment managers and firms, the management style is a significant consideration. Style involves the managers methods, bias toward or away from certain instruments, time frames, etc. Some mutual fund managers set up their portfolios to "hit a home run", unfortunately rarely do they hit one year after year. A mutual fund prospectus will identify the nature of a particular portfolio, which will help to indicate a manager's "style", but in individual investment management, you will need to inquire directly. For example, do they buy and hold for the portfolios they manage, or do they trade? Are they more focused on mutual funds or individual securities, stocks and bonds? If individual securities, what type, small cap, large cap, blends? The point is that this is a significant question that needs to be considered carefully because, if you are a buy and hold client and the manager is a trader, well, you are in for a bumpy ride.

Fee Structure:

The fee structure of an investment advisory firm is one of the key elements that defines the role of the advisor versus a broker. The investment advisor or firm is customarily compensated based on a percentage of the assets held under management. This percentage can amount to what ever is negotiated between the parties, but usually falls between 0 and 2%. Usually the higher the balance the lower the percentage. But as mentioned earlier, it is negotiable.

However, this is not the only acceptable method of compensation. The firm may charge a particular rate per hour of service or some other combination. The distinction here though is the nature of the compensation. Investment advisors are retained in an advocacy role with the client and are subsequently compensated to protect and advance the client's interests, as compared to a broker who is compensated on the transaction regardless of outcome.

It is vital to be aware of the composition of the advisor's compensation. If any portion of your advisors compensation is based on a commission for a transaction, it is worthy of note. It should not automatically be grounds for not employing that advisor, but it is worth some examination.