You may not know everything about your investments. After all, that's why you hired a professional to manage them. But how do you know if your adviser has your best financial interest at heart? Three area finance experts discuss red flags, regulations and resources for individuals concerned about their money.
David Ott, Acropolis Investment Management partner and chief investment officer, recommends individuals follow a simple rule: Be wary if it sounds too good to be true. "You'll hear stories about people who bought a bond that had a yield of 10 percent, which is way over what you could get in the market. You ask, Why did you buy that? And they say, Well, it sounded good, and he seemed like a good guy—and it wasn't good."
Additionally, Ott advises individuals to look at regulatory websites to find out more about their adviser. "What you want to see is that they have a clean regulatory history; it tells you some information about their employment situations, so if they're changing employers every year it [can be] a bad sign, just like if it was a job candidate."
Bill Hornbarger, chief investment strategist at Moneta Group, says that "everybody is searching for a single right answer, and there isn't a single right answer for everybody—there's good answers." He recommends, among other things, that individuals work with an investment adviser who is resistant to panic and euphoria.
Another important adviser trait? Active listening. "Make sure that your adviser is listening to you; make sure that they understand what your objectives are," says Guy Hockerman, Commerce Bank V.P. and senior financial planner. "Who is doing most of the talking in the meeting? Are they asking questions that go beyond explaining what investments you're in?"
Hockerman also advises individuals to look at the fees, and the transparency of them. "Do you know how much you're paying and what it's for? Are you getting something from your adviser that clearly explains that?"
At the end of that day, one simple way to learn more about your investments and adviser is to ask, Hockerman says. "It's fair to ask the question to your adviser, What are you doing that's in my best interest, and how do I know what you're doing is in my best interest?"
Hornbarger also advises asking—except this time, for referrals. He notes that when finding out more from previous clients, "I think it's important not to focus just on performance, but the whole experience."
For those wanting more information, various resources are available online to help individuals learn more about investments or their financial professional.
• Certified Financial Planner Board of Standards, Inc. (cfp.net)
• FINRA BrokerCheck (brokercheck.finra.org)
• Morningstar (morningstar.com)
• U.S. Securities and Exchange Commission (sec.gov)