How to Tell If Your Financial Adviser Is Doing a Good Job
These five questions will help determine whether you are getting what you pay for
Cheryl Winokur Munk
It’s the difficult question that anybody who uses a financial adviser wants to know: Is my adviser measuring up? Or more bluntly: Am I getting my money’s worth?
The answer is tricky, entailing both objective and subjective evaluations. But it’s also worth addressing, rather than simply letting the status quo continue out of inertia.
“It’s important to make sure that you’re really comfortable with the person you are working with – their communication style as well as the overall results that you’re getting,” says Amy Arnott, a portfolio strategist at Morningstar Research Services LLC, a unit of Morningstar Inc.
“很重要的一点是，确保你和所选择的顾问共事感到很舒服——无论是他们的沟通方式，还是你得到的总体结果，都是如此。”晨星公司（Morningstar Inc.）旗下晨星研究服务（Morningstar Research Services LLC）的投资组合策略师艾米·阿诺特（Amy Arnott）说。
Here are five questions consumers can use to evaluate their financial adviser’s performance.
1. What am I paying for?
One objective assessment is to see how an adviser’s fees stack up against industry averages. If an adviser’s fees are widely out of range, it is worth digging deeper, especially if the higher fees don’t seem in line with the services he or she is providing.
As a rule of thumb, investors who pay fees based on assets under management might expect to pay 0.59% to 1.18% a year in fees, according to a 2021 analysis by AdvisoryHQ, a global news media and publishing company.
Some advisers may charge fixed fees for financial planning, which can range from $7,500 to $55,000, depending on assets. Others charge hourly fees, typically between $120 and $300 an hour, according to AdvisoryHQ.
While investors might be able to figure out what they are paying in fees by looking at their monthly or quarterly statements, or by logging in to their account online, it can be confusing. There could be multiple types of fees and fee structures, and these can vary from one firm to another. The investor should feel comfortable asking an adviser to help flesh this out, and advisers should be willing to share fee information candidly.
2. How does my investment performance stack up?
Compare your portfolio performance with appropriate market benchmarks, Ms. Arnott says. While investments don’t always line up perfectly with the S&P 500 or the Russell 2000 small-stock index, for example, it is worth raising the question if your returns are significantly lower than an applicable benchmark. It is also a red flag if the adviser is not willing to provide comparative performance information, Ms. Arnott says.
Remember, too, that performance will fluctuate, especially in a volatile year like 2022. Regardless, the adviser should be communicating with clients to let them know whether they remain on track to meet their goals, she says.
Another concern would be if the adviser is making dramatic changes to the portfolio’s asset mix amid a market downturn. Asset allocations that are appropriate for a client’s time horizon and risk tolerance should not change because the market is down, Ms. Arnott says.
3. Does my adviser communicate to my liking?
Everyone’s expectations are different, but an ideal advisory relationship is collaborative, says Pam Krueger, founder of Wealthramp.com, a free referral service for vetted fiduciary advisers. Investors should ask themselves whether they are getting information on a regular enough basis to give them comfort and confidence in their plan, she says.
Roughly 42% of advisers said they connect with clients quarterly, according to an April survey by SmartAsset, a provider of consumer-focused financial information and advice. About 32% of advisers cited monthly check-ins, and 11% said they communicate weekly.
Clients should hold advisers accountable for communication preferences established early in the relationship. Likewise, advisers should respond promptly to queries – ideally within a day or two – and communicate in the way clients prefer, whether that’s email, phone or another way, says Susannah Snider, managing editor of financial education at SmartAsset.
Advisers should use plain English, so hard concepts can be more easily understood. And if working with a couple, does the adviser address both partners equally? “Both members of the couple should be comfortable with the adviser and up-to-speed on their finances since eventually one of them will pass away and the other person will be left to handle things,” Ms. Arnott says.
4. Does my adviser keep up-do-date on industry trends?
It’s a bad sign if your adviser is not familiar with the latest industry trends, including income strategies, tax-law changes and new investment types, or isn’t willing to do more research on your behalf. “Whatever it is that you care about, you want to know that your adviser knows more about it than you do,” Ms. Krueger says.
She offers the example of a woman who wanted to learn about cryptocurrency, not necessarily to invest, but to understand it better. Instead of using the opportunity as a teachable moment, her adviser of five years brushed her off, telling her he didn’t do that type of investing. She decided to switch advisers because hers came across as being “asleep at the switch,” Ms. Krueger says.
5. Does my adviser tell it to me straight?
A good adviser won’t just tell you what you want to hear. For instance, an adviser needs to be able to tell clients candidly to postpone retirement if there is a strong likelihood they will run out of money in their lifetimes, Ms. Krueger says. The adviser should also walk clients through the math and assumptions used to reach these conclusions. “It’s not fun to share negative news with a client, but the stakes are too high, especially at retirement. An adviser needs to be able to tell you that you need to postpone retirement in order not to run out of money in your lifetime,” she says.