How do you find the right financial adviser?
There is a deep and diverse pool of talented financial advisers on Cape Cod. But finding just the right one for you and your circumstances is a challenge.
Here is a helpful list of information you should ask for when interviewing prospects:
• Ownership of the company each works for or has founded
• Number of investment professionals in the company
• Length of time key personnel have been there and their qualifications
• Value of the assets that each of your prospects has under management
• Number of accounts that each prospect has
• A copy of a sample portfolio
• Minimum account size they manage
• Names of charities each represents
• Type of investment style each favors – income, balanced, growth, value, large cap, small cap, international, equity or fixed income
• Typical number of holdings that each has
• Average turnover of the portfolio (the higher the turnover, generally, the higher taxes will be, as gains will count as current income)
Here are some direct questions to ask if the issue relates to your portfolio:
• What type of investment approach do you use – bottom up or top down?
• Do you pick stocks based on fundamentals or technical analysis?
• What sectors do you invest in?
• How does the market cap of your portfolio compare to the S&P 500? Is it higher or lower?
• How does its price-to-earnings ratio compare to the S&P 500?
• Is your earnings growth higher or lower than the S&P 500?
• What is your dividend yield compared to the S&P 500?
• What investment process do you use to pick stocks – quantitative or qualitative?
• Do you have in-house research or do you rely on the street?
• When you select stocks, do you look for companies trading at a sharp discount to private market value? Companies trading at a discount to their growth rate? Or companies trading at the lower end of their fundamental benchmark?
• What is your investment approach to sell stocks? When price objectives are met within a specified time period? When attractive alternatives are found? Or when there is a change in fundamentals?
Reprinted with permission of the authors from “Giving: Philanthropy for Everyone.”
Originally published in the Sept/Oct 2006 issue of Cape Business.
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