Q. I read your article about how an adviser should be free from conflict on interest, competent, concerned and affordable. I just smiled, because they all will tell us what we want to hear. The question should be, how do you know if he or she is honest and telling you the truth? Is there a simple way for us non-experts to check them out?
A. There is no simple way, but here are some key requirements:
A good adviser should be a Registered Investment Advisor and NOT a Registered Representative of a Broker Dealer, an insurance agent or bank employee.
A good adviser should not have any conflict with your interests. This usually comes from compensation offered or paid by third parties.
A good adviser should accept the obligation to act in a fiduciary capacity and be willing to put this in writing.
A good adviser should base his/her investment advice entirely on your goals, resources and constraints.
A good adviser should be proactive in conducting regular analysis and review of your financial plan and your portfolio.
A good adviser should not demand, nor should you give them, discretionary control of you assets.
A good adviser should have a strong background in analytic methods – science, engineering or mathematics.
A good adviser should not be paid more than about 0.75 percent of your portfolio assets per year, and your total investment costs under the adviser should not be more than 1.0 percent of portfolio assets per year unless special circumstances apply.