Tuesday, October 4, 2011

Choosing a financial adviser? Questions to ask.

"If you think hiring professionals is expensive, try hiring amateurs." - Anonymous.


How do you get paid?

What’s your background, experience?

What’s the strength of the company you work for?

What do your clients say about you?

What are your checks and balances?

Can you put your proposals in writing?

What are the potential pitfalls of the investment products you are offering?

What do other professionals have to say about you?

What’s your gut-level comfort with this adviser?

When you meet with your adviser do you come away feeling good about what you’ve learned, where you’re headed?

There is no one investment strategy that fits all clients. That’s the bottom line message gleaned from conversations with financial advisers.

Depending on age, income, financial savvy and family dynamics each client's needs may be different when it comes to managing an investment portfolio. That’s what makes the work interesting and rewarding, they say.
Nevertheless, here are some general strategies for three groups of women investors:

Recently widowed or divorced
Women who are recently widowed or divorced are many times "overwhelmed" by the task of sorting things out... wills, investments, trusts, pensions, you name it. "Often the home filing system for accounts, investments, wills has been haphazard," an adviser told me. "Maybe the husband was in charge and knew where things were but she may not. Both husband and wife need to know the basics of where things are before something changes."

This adviser strongly recommends that woman who are on their own after a long marriage should find counsel from someone on whom they can rely and trust as they face the daunting task of settling the estate and making a myriad of financial decisions.

In working with professionals, she needs to be asking, "Why are you doing this, and why not," the adviser said.
She'll probably need an attorney and should audition several, if she doesn't have one that she is comfortable with. "Maybe this woman is a working professional, but at home she's deferred to her spouse," he said. "Now she's driving the bus. There are tax implications for how an estate is settled. She needs to be in charge."

Once, her team is in place, she should recognize that there are obligations and opportunities to respond to the needs of her children, grandchildren, even her parents. Then she can get on with her life. The good news, this adviser said is that women are multi-taskers "She can shine at this...there's lots of balls to be juggled. Women need to be prepared for that work," he said.

Women investors under 50
Women under 50 can be a lot more open to diversity in their investment portfolio and take on a bit more risk. At the same time, women need to be focused on what's going on globally.

To that end, there's an emerging middle class globally with billions of people who want to buy a Big Mac, wear Nike shoes and drink a Coke. Many American companies are seeing and will see the majority of their revenue and profit coming from outside the U.S. But because they are U.S.-based their financial statements are more transparent.

In general, it is important for women to gain investment confidence with regard to money management and financial planning whether married or single, the adviser said.  "They've got to understand what's being done and the thinking behind certain decisions. All of this falls under the generally heading of gaining confidence," he said.

How do you gain confidence?

No 1. Get educated. Keep up with what's going on in the world, the economy and seek out information sources. Financial advisers can help, or not. “Too often among my colleagues, advisers can be patronizing to women,” he said. “They can do things to their detriment. Women need to ask questions and get answers.

No. 2 Use your nose, follow your instincts when it comes to investing and money management. If you don't understand the thesis for an investment, you're probably not going to do it. Question, get answers. "If you don't have an adviser who will give you answers, find someone else," he said.

No. 3. Reading is important. Reading the Wall Street Journal can be helpful but watching the 24/7 business news channel may not be helpful because that news and analysis is to short-term, he said.

No. 4. Find useful Web sites but above all else don't limit yourself to one source. You will agree with some Web site content but not agree with some.

No. 5. Understand that things change. "At the end of the day you've got to maintain your own values but keep in mind that things will change," he said. “Be prepared for that. Just as you go to your doctor for an annual check up, you must do the same with your financial adviser, your legal adviser and accountant.

Women managing their money over 50
All of the above applies to women over 50 but this older age group also may need to be a bit more conservative. Shifting into more low beta (lower volatility) stocks such as utility companies with a good dividend may provide that security. Duke Power, Potomac Electric Co. were examples.

Women at 65 or 70 or above
Women in this age group need to be re-balancing things, again. You just can't "set it and forget it" any more. Demand that of yourself and your adviser, he said. He likes engaged, informed clients.

When you take on a financial adviser, you're taking on a partner (not unlike a marriage). "You need to be comfortable with that person," said the adviser. "Their fees, how they make their money needs to be part of the ongoing conversation. "The economic downturn and slow recovery has eroded investor confidence, made us question most everything, made us less trusting, He said that unfortunately that's also made us fearful sometimes to our detriment." That's why there's got to be open communication.

Worst case scenario for women on their own who are newly divorced or widowed? "There are often many surprises, some unpleasant, not so much that the husband was deliberately doing something wrong but that there might be unintended tax implications or just bad or ill-informed decisions," he said.

Investment advisers are very much the social worker and psychologist in working with couples (and singles) who are making investment decisions. "I want my clients confident enough to say, 'bull shit' if they don't understand something. They have to have the confidence to say this feels good, or this doesn't feel good."

Choosing a financial adviser, tips from the SEC, click here.
Selecting a financial adviser, Business Insider,  click here.
Questions to ask a financial adviser, from the WSJ, click here.

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