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What Financial Advisor Would You Vote For?


Rethinking the Democratic Presidential Debates

Imagine moderating 12 debates between potential financial advisors…

The Democratic National Committee planned 12 official DNC-sanctioned debates for those vying for the Democratic nomination for President of the United States in 2020. The DNC’s first presidential debate was held in two groups on June 26th and 27th of 2019 in Miami, Florida.

So far, according to the DNC, there have been a total of 29 major Democratic candidates and of these, 23 have participated in at least one debate. And unless you’re living under a rock, you no doubt noticed that debates #7, #8, #9 and #10 were just held in the four early voting states: Iowa, New Hampshire, Nevada and South Carolina, respectively.

Imagine if you could moderate a series of 12 debates between potential financial advisors, before casting your vote for one of them to manage your assets. What kind of questions would you ask? Would there be real differences in their answers? What would the highlights be? Would they attack one another?

Let’s pretend you are the moderator and half a dozen financial advisors are vying for your vote (interviewing 29 is way too many). Here are some topics to consider asking.

What is Your Professional Background?

What is your professional background and what real- world experiences do you have? Find out exactly where an advisor worked, for how long and why they left. Ask them to describe their work experience and how it relates to their current practice.

What are Your Educational Qualifications?

Advisors carry all sorts of professional designations such as Certified Financial Planner, Certified Public Accountant-Personal Financial Specialist, Charted Financial Analyst and Chartered Financial Consultant, among others. Different associations give these titles and some require more extensive training and test- taking than others. It is true that most of these require the advisor undergo specific training, studying, pass tests and adhere to codes of conduct. If they hold a designation or certification, check their background with the relevant professional organizations.

What Services Do You Offer?

This sounds like an obvious question, but it’s worth asking directly and listening carefully to the answer. An advisor’s services depend on their credentials, licenses and areas of expertise. One cannot sell insurance or securities products, such as mutual funds or stocks, without the proper licenses, or give investment advice unless registered with state or national authorities. Don’t assume anything.

How Do You Get Paid?

Again, it sounds obvious, but ask anyway. As part of your agreement, an advisor should clearly tell you in writing how they are paid for the services provided. The most common ways are fees based on an hourly rate, a flat rate or a percentage of your assets or net worth. While the amount you pay the advisor depends on your particular needs, they should give you a precise breakdown of costs based on the work performed.

What Conflicts of (My) Interests Exist?

Some business relationships, affiliations or partnerships that the advisor has could affect their professional judgment while working with you, inhibiting them from acting in your best interest. Many hold themselves to a fiduciary standard, meaning that the advisor can only act in the client’s best interest. Others only follow a suitability standard, meaning that recommendations need only be suitable to the client.

Ask the advisor for a description of conflicts of interest in writing. For example, advisors who sell insurance policies, securities or mutual funds usually have a business relationship with the companies that provide these financial products. They should be listed as potential beneficiaries from their recommendations. An advisor likely also has relationships or partnerships that they should disclose to you, such as compensation received for referring you to an accountant or attorney, for example.

Have You Ever Been Disciplined?

Government and professional regulatory organizations, such as the Securities and Exchange Commission, Financial Industry Regulatory Authority, your state insurance and securities departments and other professional organizations keep records on the disciplinary history of financial advisors. Ask your advisor about their past history. And then trust, but verify by contacting these groups and conduct an online background check (it’s free by the way).

Would You Put that In Writing?

Ask the advisor for a written agreement detailing the services you receive and all costs that you are responsible for in your relationship. Don’t just recycle it. Keep this document in your files for future reference.

Debates are Important

Our country has a rich history of political debates and the first true presidential debate was held in 1858 between Abraham Lincoln and Stephen Douglas. And over the next 150+ years, political debates have added to or detracted from a candidate’s appeal – go to YouTube and watch the first televised presidential debate between Richard Nixon and John F. Kennedy during the 1960 campaign, where the contrast between the two candidates was stark.

So, while you are unlikely to get a bunch of financial advisors to agree to go on stage in front of a camera as you pepper them with questions, at least make sure you ask them the tough questions.

Your financial plan depends on it.