Checklist when working with a financial consultant or advisor
Below are our answers to some very important questions to consider when working with a financial consulting professional:
Are you always a fiduciary, and will you state that in writing? [Yes]
Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services? [No]
Do you participate in any sales contests or award programs creating incentives to favor particular vendors? [No]
Will you itemize all your fees and expenses in writing? [Yes]
Who manages your money? [I do, and I invest in the same assets I recommend to clients.]
Will you consider charging by the hour instead of an annual fee based on my assets? [Yes]
Which professional credentials do you have, and what are their requirements: ChFC® [Chartered Financial Consultant] This requires rigorous study, continuing education, and adherence to high ethical standards.
Can you tell me about your conflicts of interest? [Yes, and no advisor should deny having any conflicts.]
Do you earn fees as an adviser from an estate attorney, insurance agents, private fund or other investments that you may recommend to clients? [No]
Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance? [Yes and No]
Why did you start Evidencial and what do you believe?
- Why I formed EFC: Accomplished individuals want to bridge the wealth management gap between individual and institutional insight. We guide your wealth management process through an objective lens to a higher level of financial planning and insight. Our goal is to empower individuals to make thoughtful, goal-based financial decisions about their money
- Investment Philosophy: We believe an evidence-based investment approach to investing capital worldwide offers the best opportunity to target higher expected asset class performance and compounding returns
- Financial Strategy Philosophy: We believe understanding and aligning our client’s core values, financial goals, lifestyle desires and risk tolerance are vital exchanges that enhance the success of their financial outcomes
Do you believe you can consistently beat the market? [No]
How often do you trade? [As seldom as possible, ideally once or twice a year]
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.]
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.]
Who holds my money? [Custodian Banks: i.e., Charles Schwab & Co.]
How often do we meet and review our plan and portfolio? [You have access 24/7 to your online portal for account and performance reporting. We meet once a year or at your discretion]
How do you maximize my tax efficiency? When it comes to investing, it’s not just how much you make that matters—it’s how much you keep after taxes. With thoughtful planning, you can maximize the tax efficiency of your portfolio and help reduce the effect of taxes on your investments.
How do I maximize your tax efficiency? By diversifying your tax treatment into Tax-Preferenced Accounts as follows:
Taxable Accounts like a brokerage account hold:
- Stocks you plan to hold more than one year and pay qualified dividends
- Low-cost and low-turnover tax-managed stock, bond, index, mutual, and exchange-traded funds [ETFs]
- Individually owned California Municipal Bonds that are state and federal tax-exempt
Tax-Advantage Accounts like 401K, 403B, IRA, Roth IRA, SEP IRA, HSA hold:
- Stocks and actively managed funds you plan to hold one year or less that may generate short-term capital gain taxes
- Low-cost taxable bond funds, zero-coupon bonds, inflation-protected bonds or high-yield bond funds and REITs
- These accounts are tax-deferred, and Health Saving Accounts (HSA) allows account owners to pay for current health care expenses and save for those in the future. HSA’s are triple tax-advantaged: the first advantage is that contributions are tax-deductible, or if made through a payroll deduction, they are pretax;
- Second, the interest earned is tax-free
- Third, account owners may make tax-free withdrawals for qualified medical expenses
In general, holding tax-efficient investments in taxable accounts and less tax-efficient investments in tax-advantaged accounts should add value over time. However, there are other factors to consider, including periodically rebalancing your taxable and tax-advantaged portfolio and limit trading, job mobility, business startups and estate planning issues for appreciated stocks. As always, please consult your CPA for additional tax counsel.
Can you show me a report on how I am doing? [Yes, 24/7 via your online portal and hard copy]
How will you communicate with my family and me? [Your preference: in person, by email or phone, or via text, Skype, FaceTime, etc.]
Do you manage money on a Relative or Absolute return basis? [Both: Relative to the Market, we seek top quartile-performance and Absolute return basis because it’s critical to successful financial planning that meets your goals.]
What’s the purpose of working with our children post-college? [“People Always want your Money; Your Job is to keep it safe and invest based on goals.”]
Why do you spend so much time getting to know my family and me? As a client, you want to know that Evidencial Financial knows what they need to know to advise you effectively. Clients want to know that you asked all the right questions, heard their answers and that takes time
Of the fee arrangements you offer, which one best suits my needs? We will clarify your optimal fee arrangement by matching your financial goals with our financial services.