An investment advisor helps you build a portfolio and allocate money across broad asset classes. A client usually has enough resources to need diversification but lacks the time, interest, or expertise to do it on their own. Investment advisors like Sendero® can guide a client through this process while keeping an eye on future generations. Think of us as copilots. But how to choose the right advisor? Here are five questions you might not think to ask.
What’s the firm’s structure?
I believe most advisors have positive intent, but the structure of a firm can trump that. If the firm is structured to make money on transactions, the advisor might drive transactions. If the firm is big enough to have multiple business lines like credit cards and a mortgage business, the advisor will be incentivized to push money toward those businesses. Some people may prefer that all-in-one experience, but it helps you to know how the firm operates. Sendero® is structured to be as conflict-free as possible. No bank, no credit card offerings, and no internal products. We are focused on investments.
How does the investment advisor make money?
This is another way to determine whether a firm is sales-oriented or client-oriented. If an advisor is getting paid based on the number of annuities sold, they’re going to offer a lot of annuities. Fees can be hidden in surprising ways, so don’t make the mistake of simply looking at the stated fee amount. It’s as important to know how that advisor gets paid as it is to know what they’re charging. Unfortunately, you may have to ask several questions to get the full answer. How do you get paid? By me or by your firm? Is that the only way you are compensated? Are you compensated on loans?
What kind of communication can a client expect?
Some clients may only want to meet once a year, while others like to meet more frequently. Some investment advisors are old-fashioned autocrats, while others are more collaborative, bringing the client into the process. It’s important to know about the style and procedures of an investment advisor. At Sendero®, we meet with new clients two to four times a year and talk on the phone more frequently than that. We try to make the process educational. Part of what you’re paying for is service, performance and comfort, and we want to ensure you’re getting what you need.
What is the safety and security of the assets?
Everyone wants assurance about their money. At Sendero®, we’re an advisory firm, not a bank or custodian. By law, customer assets sit at a separate custodial organization. We have relationships with highly secure custodians and regularly confirm and analyze the safety of those firmsThe safety-and-security answer will vary across the industry, and it’s worth asking: How much insurance does the firm carry? Are my assets protected? Sendero® approaches all relationships as a fiduciary in our clients’ best interests.
What can I expect beyond financial performance?
A relationship. Someone who knows you and your family. Someone who can grow with you as your family and your needs grow. Financial performance is crucial, but it’s not everything. An investment advisor can educate and connect you with valuable resources. Sendero has developed resources for family office, philanthropy, general planning and specifically women. Your investments will determine the shape of your future. Whatever advisor you choose, you want to be certain they are doing the most for you and your family.