Financial advisers can provide valuable help, but problems often arise that could prevent you from getting the most value for the money that you are paying a financial planner, estate planner or other adviser. Common problems and how to get what you pay for…
Problem: Your portfolio is consistently losing money or significantly underperforming the overall market.
What to do: Make sure that you are using the appropriate benchmarks when you judge your portfolio’s performance depending on your mix of investments. Example: If 60% of your portfolio under the adviser’s supervision is supposed to be large-cap stocks and 40% small-caps, compare its performance to that of a portfolio that is 60% the Standard & Poor’s 500 Index and 40% the Russell 2000 Index. If your portfolio is trailing the benchmark for the past five years, ask the adviser what value he/she is adding. Realize that even if you are lagging the overall market, your adviser could be giving you exactly what you asked for. Your portfolio might be designed to experience less volatility but lower gains than the overall market, especially over short periods.
Problem: Lack of personal attention. Three or four days go by before your adviser returns your phone call, or he contacts you only when he has a new product to sell.
What to do: Say, “I’m concerned that you are getting too busy and that I’m not an important enough client for you.” Most investors can expect a written quarterly update on portfolio performance if the adviser is providing money-management services. Also expect a sit-down meeting twice a year to discuss tweaks to the plan and phone calls returned within 24 hours.
Problem: You want to change your adviser. Over the years, a client and planner can grow apart. For example, you may be entering a phase of your life, such as the end of your career, when you need someone who has more experience with retirees.
What to do: Find a replacement before you leave your old adviser. Your new financial representative can take care of all the paperwork surrounding the transfer of your portfolio and assets. That relieves you of the burden of communicating with your old adviser if you choose not to. You can find a financial planner near you through the National Association of Personal Financial Advisors (NAPFA) at www.napfa.org.