Under current law, financial advisors and brokers are bound by a “suitability” standard that requires them to recommend investment products deemed “appropriate” for a client’s defined need and objective. This standard of care does not rise to the level of a fiduciary, who is legally and ethically obligated to put their client’s best interests ahead of their own financial gain.
While some investment firms have taken steps to adopt a fiduciary standard of conduct, others have not, leaving consumers with the responsibility to protect their interests and assets from potentially unnecessary products and fees. The only way investors will know for sure is to ask the right questions and listen for acceptable answers, some of which are listed below.
Question: How am I charged for your services?
Preferable Answer: The answer could be an annual fee based on the amount of your investable assets, a combination of fees and commissions from the products they sell to you, commission only, or even hourly or retainer fees. The point is you should know from the onset how your advisor will be compensated and what you will be expected to pay.
Question: Will you earn a higher fee or other type of compensation, now or in the future, if I invest in products you recommend? Will you receive fees for services related to specific investment products?
Preferable Answer: The answer could be “yes,” but full disclosure from the advisor will help you to make a more educated decision.
Question: Do you receive compensation from anyone else when you recommend specific products or services?
Preferable Answer: No.
Question: Do you earn fees or commissions for referring clients to other professionals, such as estate planning lawyers, insurance agents or tax accountants?
Preferable Answer: No
Question: Do you earn fees as an advisor on any investment that you recommend to clients?
Preferable Answer: No
Question: Do you participate in sales contests or other incentive programs sponsored by your firm or by providers of specific products or services?
Preferable Answer: No.
Question: Can I see a copy of all the fees and expenses I will be expected to pay you to manage my money?
Preferable Answer: Yes.
Question: What is your investment philosophy?
Preferable Answer: There is no right or wrong answer, but you should know how the advisor plans to invest your money.
Question: After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?
Preferable Answer: You should look for a conservative number of less than 5 percent. If the answer is an exaggerated number or if it sounds too good to be true, it is probably false.
Question: Do you expect to beat the market?
Preferable Answer: No.
Question: How do you report investment performance?
Preferable Answer: Again, there is no right or wrong answer. Knowledge is power. The more you know, the better decisions you can make.
About the Author: Eric Zeitlin is managing director of Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Eric Zeitlin is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
To learn more about Provenance Wealth Advisors financial planning services click here or contact us at info@provwealth.com
Posted on March 20, 2024