The process of interviewing money managers could be a daunting one, particularly if this is your first time entrusting another person with the oversight of your hard-earned money! Here’s a list of some 10 questions you should consider asking:
- Are you acting as a fiduciary?
This should be one of your very first questions (if not the very first). You want to make sure that your advisor is acting in your best interest.
- Tell me about your background. How do you work with clients? Give me a sense for what your clients look like.
Of course, you should learn more about the advisor’s background, credentials, and interests. Not only do you want to make sure that the advisor is qualified to do the job, but you also want to make sure there’s a good personality fit. During this conversation, it also makes sense to get a better understanding of the existing clients he or she currently works with. Does it appear that he or she has the ability to advise on a multitude of different scenarios? Is there diversity amongst his or her clientele? Do you think you would be a good addition to the clientele?
- What is the way in which you invest money?
The advisor’s response should provide you with insight on their investment philosophy, their offerings, and how they factor in risk, volatility, and of course, your personal goals and objectives.
- What makes you and your firm different from others?
The reality is that investments is a commoditized business. You have to identify what are some non-negotiables for you. Ideally, you’re hiring an advisor that you hope to have a longstanding relationship with. This person will ultimately meet other members of your family. Be prepared to look for some key differentiators the sets the advisor apart from others.
- How many clients do you currently have?
The number of clients is important. It gives you an idea of their capacity and their ability to provide you with time and attention.
- What are some of the services I should expect to receive from you?
Depending on the size of the firm, the services could very limited or, in cases where you’re interviewing a large institution, their services could be more than what you need presently. It is good to ask. As circumstances in your life changes, it is good to know how your advisor and the firm could be helpful in the future.
- Who are other members of your team?
It is helpful to know all members of the team and the role each plays in your relationship. If you are unable to reach your advisor, particularly in an emergency situation, you should have the contact information for others on the team.
- How often will we meet?
Getting an understanding of how often you plan to speak to your advisor is always a great idea. It makes sense to set a precedent early on and establish the frequency of meetings.
- How are you compensated?
This one may seem like a weird one, it is one that is often overlooked during the vetting process. It is always good to full have transparency on how advisors get paid. Depending on the firm, some advisors are paid an annual salary, plus a discretionary bonus, while advisors at other firms are paid a percentage commission based on the assets the manage. It is always a good idea to have a full understanding, particularly as you’re vetting managers, to have full transparency on how they’re paid.
- What is your fee?
Understanding the fee you’re paying is a critical piece to your decision making. Sometimes the fee discussion can get a little involved and confusing, so it makes sense to have a clear picture of the fees you’ll be paying to the advisor, plus the underlying fees you’re paying for each of your investments.