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Issue #21-6.5.07
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Hiring a Financial Advisor?
Check ‘Em Out First
With the multiple investment opportunities available in the marketplace and numerous companies that tout their financial expertise to consumers, how do you know which firm or investment advisor would be the best fit for you and your financial needs. Choosing a financial advisor who is suitable for your situation needn’t be complicated, but a little homework and a small investment of your time up front will yield both a much better match and, most likely, a better return on your financial investments as well.
Start your search the old fashioned way – word of mouth. Talk with friends, family, business associates, and others to gather a few names of individuals with whom they’ve worked and had positive experiences. Another valuable source for names and contact information is the Financial Planning Association at www.fpanet.org or the National Association of Personal Financial Advisors at www.napfa.org.
Once you have a list of names in hand, check them out, urges Don McKinney a principal with Neidiger, Tucker, Bruner, Inc and an investment advisor with NTB Advisors, a full-service Registered Investment advisory firm. “You want to be sure that the advisor you choose has never had disciplinary action taken against them for unethical or unlawful practices.” He notes that one of the best sources is the NASD, which has long served as the primary private-sector regulator of America's securities industry. A wealth of information can be found online at www.nasd.com where individual financial advisors can be researched for any violations under BrokerCheck.
Next, Mr. McKinney recommends interviewing a few investment advisors to determine who will be the best fit for your needs and interests. “You want to know how they ensure that their clients’ interests come first before their own. Ask them several questions, including, do they act in a fiduciary capacity? Do they provide full and fair disclosure of all material facts regarding investments? How do they manage conflicts of interest? How long have they been in practice? Do they have other clients whose needs and interests are similar to yours? How are they compensated? Be sure to ask for references and follow-up with them. Ask the references about the type of investment advice they sought and if the advisor met their needs and expectations.”
Mr. McKinney urges dentists to pay particular attention to how the financial advisor is compensated. Typically, financial advisors receive their compensation in one of three ways. They may receive an annual percentage of the assets managed. This is usually one percent and does not include brokerage costs or expenses and sub-advisory fees of mutual funds. Or the compensation may be based on either an hourly fee or a flat fee per project. Or the advisor’s compensation may be commission based and contingent upon the sale of specific products to clients. The commission may be as high as 5.0-6.0 percent for annuity products or 4.75 to 5.0 percent for mutual funds.
“The fee arrangement should put the advisor on the same side of the table as the client,” emphasizes Mr. McKinney. “For example, if the arrangement provides that the financial advisor receives one percent of the assets then the better the investments do the more the advisor will make. If the assets go down the advisor makes less. There’s no conflict of interest with this arrangement where there might be if the broker is selling a specific product on commission,” explains Mr. McKinney.
However, if your goal is simply to make periodic investments, then a commission-based fee arrangement may be perfectly suitable. If you have the need for a full range of asset allocation and ongoing management services, then an annual fee basis may be the better fee structure. And if your situation is a specific one-time need then a flat fee may be the best approach.
In working with your investment advisor, Mr. McKinney says that you should be able to expect that your needs and interests always come first. “The advisor must act in the client’s best interest and in good faith. Under no circumstance should an advisor mislead a client or act in their own interests. They should expose all conflicts of interest, and provide full disclosure of all material facts of any investment recommended as well as sources of compensation that come to the advisor.”
For more information contact Don McKinney a Branch Manager of Neidiger, Tucker, Bruner, Inc (Member NASD/SIPC) and NTB Advisors: 1442 Camino Del Mar # 213, Del Mar, CA 92014 at 866-794-7300 or via email at DMcKinney@ntbinc.com.
This article shall not constitute a solicitation in any state or jurisdiction in which such solicitation would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.
Sally McKenzie is CEO of McKenzie Management. a nationwide dental management, practice development and educational consulting firm. Working “on-site” with dentists since 1980, McKenzie Management provides knowledge, guidance and personalized systems that have propelled thousands of general and specialty practices to realize their potential. Sally can be reached directly at 1.877.777.6151
Interested in speaking to Sally McKenzie about your management concerns? Email her at Sally@thedentistsnetwork.net