19 Questions You Should Ask Your Financial AdvisorSubmitted by Castlebar Asset Management on August 28th, 2017
Jason Zweig is a long-time columnist for the Wall Street Journal. In this weekend’s Intelligent Investor column, he offered 19 questions that you should ask your financial advisor. The questions are direct and to the point. It will give you great insight on if your financial advisors business, investment approach and expectations are aligned with yours. I thought it would be a good idea to answer how Castlebar stacks up. Spoiler alert: We are on the same page with Mr. Zweig. His recommended answers are in parentheses.
1. Are you always a fiduciary, and will you state that in writing? (Yes.)
Yes, 100%. Castlebar is and has always been a fiduciary advisor for our clients. Our financial plans and investment strategies are created with your best interest in mind. The recent fiduciary rule changes had very little impact on our business because we on the right side of this for our clients.
2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services? (No.)
No. Only our clients pay Castlebar any compensation.
3. Do you participate in any sales contests or award programs creating incentives to favor particular vendors? (No.)
No. If we go on vacation we pay for it ourselves or with airline points!
4. Will you itemize all your fees and expenses in writing? (Yes.)
Absolutely. On our quarterly statements we mail to clients there is an itemized billing calculation. Our reports also show our fees and other expenses over time. Our reports are easy to understand and transparent.
5. Are your fees negotiable? (Yes.)
Our fee structure is published on our website. For larger accounts fees are negotiable.
6. Will you consider charging by the hour or retainer instead of an annual fee based on my assets? (Yes.)
For clients who use our financial planning advice only we do bill by the hour or on a fixed fee basis.
7. Can you tell me about your conflicts of interest, orally and in writing? (Yes, and no adviser should deny having any conflicts.)
This is a broad question. One conflict we have is when we select a custodian, in Castlebar’s case it is Charles Schwab. This is where we set up your accounts for us to manage. There is some conflict because we don’t change custodians frequently. Right now Schwab has the most cost effective platform in terms of costs for our clients but this could change. If they became less cost effective we may still remain with Schwab because the cost of switching is prohibitively expensive for our company and the benefits for our clients would be minimal.
8. Do you earn fees as adviser to a private fund or other investments that you may recommend to clients? (No.)
9. Do you pay referral fees to generate new clients? (No.)
10. Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance? (Here the best answer depends on your needs as a client.)
We focus on financial planning and investment management. This includes offering our guidance on budgeting, debt management, retirement planning, college planning and insurance. We don’t do taxes or estate planning. We leave that to the pros in that space.
11. Do you earn fees for referring clients to specialists like estate attorneys or insurance agents? (No.)
No. Our goal when we refer our clients to estate planning attorneys, accounts or insurance agents is to match them with the best professional who fits their specific situation or need, cost expectation and is a personality fit. We often recommend two or three professional each time a client asks for a referral. This allows our clients to meet with more than one professional and make an educated decision.
12. What is your investment philosophy?
We believe in creating diversified portfolios in a cost effective manner. We build custom portfolio for clients based on their specific financial goals and objectives. Our portfolios cover a broad investment allocation for domestic and international stocks and bonds. Our individual stock portfolios are a blend of value and momentum based stocks.
13. Do you believe in technical analysis or market timing? (No.)
14. Do you believe you can beat the market? (No.)
Over time strategies can beat the market. To guarantee or believe you can beat the market in a set period of time is not logical.
15. How often do you trade? (As seldom as possible, ideally once or twice a year at most.)
We rebalance our portfolios asset allocation (stock and bond mix) once or twice a year. For our individual stock portfolio we have between 20% and 30% turnover each year. This is low by industry standards.
16. How do you report investment performance? (After all expenses, compared to an average of highly similar assets that includes dividends or interest income, over the short and long term.)
We report our investment performance after all expenses. We show our performance on a quarter to date, year to date, three year, five year and since inception basis.
17. Which professional credentials do you have, and what are their requirements? (Among the best are CFA [Chartered Financial Analyst], CPA [Certified Public Accountant] and CFP, which all require rigorous study, continuing education and adherence to high ethical standards. Many other financial certifications are marketing tools masquerading as fancy diplomas on an adviser’s wall.)
We have both a CFA charterholder and CFP professional on our team. This gives you professionals who have earned the highest credentials for investment management and financial planning working achieving your goals.
18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term? (If I told you anything over 3% to 4% annually, I’d be either naive or deceptive.)
This depends upon your investment allocation. A range of 3% to 5% is fairly accurate after inflation, taxes and fees. Taxes will reduce your returns by 15% to 39%. Inflation will range between 2% to 4% on average and our fees are 1% or less.
19. Who manages your money? (I do, and I invest in the same assets I recommend to clients.)
I eat my own cooking! I own the same stock portfolio and other investments we buy for our clients. Having skin in the game keeps me aligned with our clients, because I am also a client!
Andrew Comstock, CFA
Please contact me at 913-660-0708 or by email to discuss your financial planning and investment management needs. You can sign up for our monthly newsletter here. Follow me on Twitter @CastlebarAM.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.