Every investor working with an advisor wants to feel confident that their hard-earned money is in competent hands. And that means finding an investment advisor who has a solid understanding of equity (stock) markets and industry trends. Here are six key questions you can ask that should help you separate those in the know from those who aren’t.
1. What’s happening in the market today?
You need an investment advisor who is keeping track of interest rates, can manage currency risk, is knowledgeable about global economies and has access to a wide range of financial products across all asset classes.
2. During the recession of 2008, what did you do?
This is a loaded question and leads to several follow-up questions, including: What investments were you buying? Were you selling? What did you tell your clients? How did they fare during this period?
3. What was your strategy through the most recent bull market?
Did your clients capitalize on rising stock markets?
4. Will you be building and managing my portfolio?
If a third party is responsible for these tasks, this could be a red flag because they aren’t the ones making the investment decisions. They are selling a product.
5. How would you describe your management style?
There are essentially three types of investors: value investors–these investors are always looking to buy good value companies at a discount; growth investors–these investors want to buy stocks that are on the rise; and growth at a reasonable price (GARP) investors–as the name suggests, these investors are willing to pay more for a solid investment than value investors, but not as much as growth investors.
6. How often do you rebalance a portfolio?
There is no ideal asset-class mix because the market is ever changing. It’s important for an advisor to follow what’s happening in the bigger world and adjust accordingly.
Ultimately you want to ask questions that will reveal how an advisor runs his or her business and from that you can glean whether or not they are following the markets closely.
Word To The Wise
Do your homework before interviewing potential investment advisors. The internet has made it simple to find out just about anything. If your advisor claims to have earned double digit returns during a period of time when the stock market lost money, find out exactly how they did it. You want to feel confident they are being truthful.
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My approach to investing is straightforward. I help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client.
I’m currently offering a complimentary portfolio review where we sit down together to review your portfolio in an introductory meeting that focuses on five main things: Where are you today? Where do you want to be tomorrow? What’s your timeline? What’s your risk tolerance? There also will be a discussion of strategies that could give you a better plan to secure and grow your portfolio. It’s a great opportunity to get to know each other. I welcome you to call me at 416-332-3863 or email me at firstname.lastname@example.org.