I talk to a lot of professional athletes and before I get off the phone with them or end a meeting, I ask if they have any questions. More times than not, the answer is “Nah, I think I get it.”
Let me be the first to say that this stuff can be very complicated and it’s totally fine if you don’t understand it all. It’s your money and it’s important to you! You’ve worked hard to earn it so the least you can do is educate yourself on how it’s being managed.
Your financial advisor should be willing to answer any of your questions, no matter how “dumb” or “unsophisticated” they may seem. So if you don’t get it, don’t fake it because you’ll never learn unless you ask.
Having said that, here are 10 questions you should ask your current or potential financial advisor:
Are you registered with a broker/dealer or registered investment advisor (RIA)?
Being registered means they should be operating under specific rules and regulations of the industry which is a good thing! www.sec.gov or brokercheck.finra.org are great resources to verify if they are registered.
Do you provide clients with the ability to independently verify the status, balance, and transactions in their investment accounts?
You want the ability to check on your accounts without having to depend on your financial advisor. Ask for a number to the brokerage firm or get online access to your accounts and check your balances periodically.
Who would be my account custodian?
Some financial advisors have direct access to your assets while other firms use independent third parties to hold them. Verify that the custodian is reputable and if they are affiliated with or independent from your financial advisor. Using an independent custodian can help avoid misappropriation of funds.
Is your firm independent or affiliated with a broker/dealer?
Some advisors work directly for their broker/dealers and others are independent. There are pros and cons of both so do some research on the firm to make sure they are reputable. Sometimes, financial advisors who are affiliated with broker/dealers may have proprietary products they are incentivized to sell you because they will earn a higher commission even if it’s not in your best interest.
How do you get paid?
Some advisors get paid a flat fee, some get a commission per transaction, and others get a percentage of assets they manage. Know how your financial advisor gets paid and understand why they chose that model.
What is your fee?
You want to know how much you will be paying. You wouldn’t go buy a car without knowing the price first so figure out what your financial advisor’s fee is beforehand.
Do you have a Series 65/66 Registration, or are you a Certified Financial Planner (CFP)?
Check to make sure they are qualified to handle your finances. You can verify this at brokercheck.finra.org.
Can you explain your investment philosophy in a terms I can understand?
You should know your financial advisor’s beliefs about investing. You may hear words like “growth” or “value.” Just make sure they can explain it to you in terms you understand.
Do you have experience working with professional athletes?
Professional athletes have different financial situations than other professions so your financial advisor should be comfortable handling your unique circumstances.
Do you provide private investment advice and due diligence on a wide variety investments?
You may have other investment opportunities outside of your financial advisor’s scope. Some advisors can’t or won’t advise on these investments so check before hand so you know who you can turn to if the opportunity arises.
Remember, if you never ask, you’ll never know. There is no such thing as a dumb question! If you don’t feel comfortable asking your financial advisor these questions or they don’t encourage you to ask them, give Rosecrete a call and we will gladly help you out.
Reggie D. Ford, CPA is the Founder and President of Rosecrete Wealth Management. Rosecrete provides personalized, comprehensive financial services to affluent and high net worth clients. Rosecrete focuses on sports, legal, and medical industries with a passion for helping younger generations with early retirement planning.
For a list of states in which I am registered to conduct securities business, visit my website at www.rosecrete.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing includes risk including potential loss of principal.