When it comes to your financial wellness, selecting an advisor you can trust is one of the most important decisions you can make. Every advisor says they want to be your “trusted partner” and it can be daunting to find one who can truly be trusted to put your best interests first. Getting a referral from a person you trust is a good start. You may also find advisors through publications and speaking events. Once you have a recommendation, what next?

An advisor’s credentials and experience are important and can tell you whether an advisor is reliable and competent, but we believe a good wealth advisor does much more than manage investments or design financial plans. They truly get to know you and your family to understand your goals. They will coach you on the reality of meeting those goals and help you do so while maintaining their responsibility to do what is best for you. Here are some questions to ask and issues to consider as you’re interviewing prospective advisors:

Are you a fiduciary?
Your wealth advisor should be a fiduciary. A true fiduciary has a legal obligation to put your best interests first, ahead of their personal interest, and ahead of their firm. They must treat all clients fairly, rather than favoring some clients over others, and they should commit to this in writing. Registered investment advisors (RIAs) like Fulcrum Capital are bound by the fiduciary standard in all aspects of the client-advisor relationship. If an advisor, bank, or trustee is a representative of a broker-dealer or is dually-registered with both an RIA and broker-dealer, they may not be held to the fiduciary standard on all the services they provide.

How are you compensated?
The only compensation your advisor should receive is the advisory fee for the services provided in your engagement agreement. Most advisors charge their fee as a percentage of assets; as your portfolio grows, so does their fee so your interests are aligned. If an advisor isn’t willing to clearly outline all their sources of compensation or if they are paid by a third party for recommending products, you may want to look elsewhere.

Besides your advisory fee, what other direct or indirect fees will I be charged?
Your wealth advisor should provide the details of all costs, fees, and expenses in the investments in your portfolio in a format that is easy to understand.

Does your firm derive any revenue or soft dollars from your investment programs?

Ask if the firm trades for their own accounts or acts as a principal in transactions. An example is a broker who purchases a bond for your account out of their own inventory of bonds. It’s also possible for an investment manager to pay to be added to an advisory firm’s list of preferred investments, either outright, or indirectly through expense reimbursement, free research, and other perks. These agreements are generally not in your best interest.

What are your qualifications?
The alphabet soup of credentials can be confusing, but there are a few widely recognized ones to look for. Anyone holding themselves out as a financial planner should have the Chartered Financial Planner (CFP®) designation. CFP® professionals have met extensive training and experience standards, maintain their knowledge through regular continuing education, and commit to ethical standards that require them to put their clients’ interests first. Likewise, the Chartered Financial Analyst (CFA®) designation is the gold standard for investment professionals. CFA charterholders are also required to follow strict ethical guidelines and go through rigorous training, including years of qualified work experience.

Ask them to disclose any client complaints or arbitrations, regulatory actions, and criminal proceedings that they or their associates may have been a part of. You can look that information up yourself on the Investment Adviser Public Disclosure website.

What is your firm’s ownership structure? Who calls the shots?
Look for an independent, owner-run advisory firm that demonstrates a history of financial stability, broad ownership, and a well-defined succession plan. When your advisor is a fiduciary and also an owner, your success is vital to their success, and vice versa.

At many big institutions, your service team is far removed from the decision-makers who are calling the shots when it comes to your individualized service needs. Publicly traded firms are beholden to shareholders who don’t know you or care about your needs. A truly independent advisor will have greater control over the service you receive than a team at a big institution.

Additionally, a firm backed by private equity or with ownership concentrated in one or two individuals can present problems. And advisors who provide in-house accounting, trust, insurance, and legal services introduce conflicts of interest.

Much of the information needed to answer these questions is publicly available. Please don’t hesitate to contact anyone at Fulcrum Capital with questions; we welcome a conversation about any of these topics.