Unless you are passionate about the world of finance and with time, money, training and a lot of interest you end up becoming a competent investor, you will need the services of a good financial advisor. The problem is that I think it is quite difficult to find a good financial advisor. That is why I propose that you ask these questions to your current advisor since it will give you clues to know if you are looking after your interests or if you are worrying more about filling your pocket.
What are the total expenses to pay this year?
This is the most important question of all since in some cases it can mean the difference between making money or financial ruin. Normally investors have no idea of the total expenses they are paying each time they purchase an investment product or the services of a financial advisor. So please make sure you know in writing all the expenses you are having, including these:
- Commissions that you are paying for the advice either by the hour, by the percentage of the capital invested or included in the products you are hiring.
- Total expenses of the funds or investment products in which you are investing
- Somewhat more hidden expenses due for example the internal transactions of the funds or the forks that are applied in the purchase-sale, exchange of currency, etc.
In which companies, sectors or countries do you have to be to do well this year?
The correct answer is “BY NONE.” If your advisor talks to you, for example, about betting on raw materials and energy this year, what he is doing is speculating with your money. You probably do not know that the conscientious macroeconomic and geopolitical analysis with graphs and colors that happen to you from your analysis department, the only thing they do is increase the risk and reduce the profitability, they are costing you a lot of money!
On the other hand, if your advisor tells you to build a globally diversified portfolio that includes hundreds or thousands of companies around the world and with a percentage of investment grade fixed income both corporate and government, then your advisor has an approved in this Question.
How do you charge your fees?
This is a delicate but very important question to know the degree of independence of your financial adviser and the incentives you may have to offer one type of product or another. Keep in mind that if your financial advisor charges you directly for your service (for example a fixed annual fee) your degree of independence will be much higher than if you charge a commission for the products you offer. In this second case, there may be a greater conflict of interest because if you offer products that do not pay any kind of commission do not earn money and you know that nobody likes to work for free. To quote an example of an amazing financial planner who needs no introduction is Ed Rempel. In regard to Ed Rempel Brampton, all we can say is that he is a certified financial planner, and also blogs according to his experiences and shares meaningful insights.