By Joan Perry, President, Take Charge Financial! and The Financial Advisor for Women
Choosing someone to partner with you in financial management is one of the most important decisions you can make as a woman. For decades I have been helping women manage and grow their money. Here are some questions to consider when you are interviewing the person you would like to form a partnership with for the long run to help you grow your money – so you are a financially secure and happy woman in the future.
When interviewing a Financial Manager, you will want to ask the following 12 questions:
1. How long have you been working with clients to actively grow money with the tools of the financial marketplace?
Answer: Your Financial person should have no less than 10 years of experience actively managing and growing money for individual clients. Ideally, she or he will have experience actually trading securities in the financial markets and can demonstrate her or his knowledge in actively managing money. They could also do this by demonstrating that their clients have been with them for long periods of time.
2. Do you sell financial product and/or do you help me to develop my financial plans?
Answer: A Broker sells financial product and a Financial Advisor helps you to develop financial plans. Often, a Broker will not be good at laying out the path to plan financially – and an Financial Advisor will not be good at directing investments in the marketplace. That is why we call ourselves Financial Coaches – because we incorporate both skills. It is important to be aware of what services you are being provided. All of these people are considered to be Financial Managers.
3. Do you ‘actively manage money’ to grow it in the financial markets?
Answer: ‘Active management’ means that your Financial Manager will be on top of what to buy and what to sell – and when to buy and when to sell. Mutual funds are ‘passive’ money management – unless your Financial Manager is active in the continual process of buying and selling. Your Financial Manager should be willing to take responsibility for creating performance in the growth of your money and you can expect to hold her or him accountable by choosing to work with this person.
4. Do you charge a commission or percentage when managing my money?
Answer: A Broker will charge a commission to sell financial product – and an Advisor will charge a percentage of the assets in your portfolio. Your Financial person may offer one or both options – and both are acceptable. At Take Charge Financial! we generally charge a percentage fee – because this is consistent with being responsible for performance not generating excess trades. Our fee is two percent of the assets that we manage per year – which is a standard fee in the industry. More than this amount – and particularly this amount on top of a mutual fund charge would be excessive – so important to understand the fee and any additional charges that you could incur.
5. What is your Performance Record?
Answer: The Financial Manager should be able to clearly explain to you how her or his clients have performed over the past two years. If the person has achieved 10% or better for the last two years – then this is reasonable performance. Financial markets vary widely from year to year.
6. How does your Performance compare to Standard Stock Market Indexes?
Answer: Your Financial Manager’s performance — the growth rate percentage that she or he is achieving for clients’ money — should outperform standard market indexes. These indexes are the DOW, the NASDQ and the S&P indexes that are quoted in the newspaper and can be seen on the web at http://finance.yahoo.com. If you take the #72 and divide it by the growth rate – it will tell you how many years that it will take for your money to double. For example – our return of 10% into #72 means that your money will double every 7.2years – a minus# into the #72 means that you are dead in the water and your money is not growing. Or, a savings account will typically pay you 2% — 2% into the #72 means that your money will double every 36 years – and this will not enable you quickly. Rate of return is very significant to you.
7. Do all of your Clients experience the same rate of return on their portfolios if they invest at the same time?
Answer: In a traditional brokerage firm setting, you will experience a difference result depending upon which Broker that you chose – and whether or not you are one of her or his bigger clients. Also within her or his client base results will differ because the Broker is selling different financial product to different clients. In the traditional financial advisor setting, the Financial Advisor may be using different mutual funds for different clients. This makes it hard to determine your results. We call ourselves Financial Managers because all clients are treated equally in our firm – as we manage money in our core portfolio and are accountable for the results – all clients are invested in the same financial tools at the same time and are treated equally regardless of account size.
8. What is your track record — educational background and industry reputation?
Answer: Go to www.nasd.com and see if your Financial Manager is listed and what track record is listed. This is information that the FINRA collects – and they are the licensing body for the brokerage community. Also – with educational background – you can see if your financial person has been a student of the aspects of growing money and the distinctions of managing money in the financial markets. This knowledge takes many years to acquire and effectively put to work for your money.
9. What’s the average net worth of your Clients?
Answer: You will want to partner with a Financial Manager who works with people like yourself with similar financial backgrounds on a regular basis.
10. How do I know that you will help me to grow my money in ways that I might not do myself and how will I know that you have grown my money?
Answer: Your Financial person should be monitoring the performance of your portfolio at all times when the markets are open and you have money invested. Go visit or call your Financial person to discuss portfolio performance. On a monthly basis, you should get an account statement. When your Financial person makes changes in your account, you will get a confirmation of the trade. These are your tools for monitoring the growth of your money.
11. What should I do to know how my money is growing?
Answer: You should learn to read the quarterly, monthly and confirm statements that are sent to you by your Financial Manager. If you don’t understand something that is on them – it is your responsibility to call her or him and ask for an explanation. It’s best to get a binder and put these statements in the binder as they come in the mail to you – for easy reference.
12. How often and when are you available for me to talk to you?
Answer: A call to your Financial person’s office should get you what you need. If not – a good Financial person will want you to feel comfortable about the process of investing and growing money and will sit down with you in person to answer questions as needed. Also – check your gut feeling here – and determine if you are comfortable with the responses and your ability to work in partnership with this person as you both provide information and resources in this process. P.S. If after three months your are not feeling comfortable with the Financial person that you have chosen – then repeat this process and chose again – most important is that you grow your money to meet your future.
Feel free to call me with questions as you are selecting your Financial Manager!
Joan Perry, President, Author, Licensed Broker/Financial Coach Take Charge Financial! 408-399-6600 315 University Ave. Los Gatos, CA 95030 www.TakeChargeFinancial.com
