If you are considering working with a financial or investment advisor, you should be comfortable asking them any or all of the questions you may have about who they are, how they work, how much they charge, what you will receive, etc. Here is a list of some questions that you can select from, to help you get started, along with our own answers to these questions.
1. Tell me about yourself, how long have you been a financial advisor (FA)?
I have been a financial advisor since 1994, when I joined Spero-Smith as an investment analyst, so I have been in the industry for more than 20 years.
2. What did you do before you became an FA? What made you decide to pursue this as a career?
I worked for GE Capital and Wachovia Bank, in Atlanta, in sales and client service. I always wanted a career where I could help people live fulfilling lives, as well as remain intellectually stimulated, and this profession fulfills both desires.
3. What are your qualifications? Tell me more about these qualifications. What do you need to do each year to remain current?
I believe strongly in education. I have a BA (Bates College), and an MBA (Emory Univ.). I also hold two industry designations, the CFP® and the CDFA. The CFP (Certified Financial Planner) is the industry standard designation for financial planning and investment advisory services. We are required to keep current in the profession by reporting 30 CE (Continuing Education) credits to the CFP Board every two years. The CDFA (Certified Divorce Financial Analyst) provides designees with the specific tools to educate clients on the short-and long-term financial implications of different divorce settlement proposals, and to provide education and assistance to people going through a divorce. CE credits are required for both designations.
As stated above, I also have more than 20 years experience working with several local wealth management firms in client service and investment management. I have worked with clients who had $100,000 to invest up to several with $15 million to invest. Obviously there are some issues which are common across all investment accounts, and some others that are unique based on the size and taxability of the portfolio.
4. Tell me about the firm you work with? What attracted you to this firm?
I started Bell Tower Advisors, LLC in early 2010 to specialize in working with women. It had not gone unnoticed by me that there were few firms locally, much less nationally, that provided a unique offering for women, where they would feel more comfortable talking about finances, and not patronized in the process. There has been a need for a different kind of service in our industry for a long time, and I believe women deserve a better experience in working with a financial advisor.
5. What do you look for in new clients? Can you describe the kind of client you find you work best with?
I enjoy working with women because generally we are more collaborative and relationship-oriented. (There are also studies which state we are more risk averse, take our time researching investments, and are better investors as well!) I seek to work with independent, mid-life women, with whom I can develop a personal relationship. We do not discriminate, however, I work with like minded men as well.
6. What’s the average asset level of your clients? How many client households do you work with, and where would my portfolio fit in?
I am seeking to have a relatively small number of clients (ideal firm size will be limited to 20-30 clients), so that I can provide outstanding service. There is no minimum asset level, though I have found that my skills and service offering are ideally suited for clients with more than $500,000. We are currently working with about 10 clients (early 2015).
7. Tell me about the last couple of clients who left you and took their accounts elsewhere. Have you had any client complaints to your firm in the past few years?
8. Do you also complete financial plans for people like me? What would be covered in this plan?
While my expertise is in investment planning and management, I do offer financial planning as needed.
9. What is your investment philosophy and process? How is this different from other advisors?
Generally, I believe in efficient market theory and not market timing. To participate in market returns, you must be invested. Proper diversification of assets (via asset classes and investment categories) can reduce risk and enhance returns. The most important part of the investment process is determining the appropriate asset allocation, which we cover upfront and review regularly.
10. What kind of changes would you recommend in my current portfolio? Tell me about your reasoning for these changes. Which of my current holdings would you suggest I keep?
Once I have seen your portfolio, I can respond to this question. However, in my experience it is quite common for investors to be in very high cost products and also to be less diversified than they thought.
11. Some advisors believe in “active” management of assets, and others believe in “passive” management. What is your belief and strategy? Some advisors build portfolios of stocks and bonds, some delegate this to money managers or mutual funds. And still others use Exchange traded funds (ETFs). What do you use?
Equity management: While I strongly lean towards passive management, using both ETFs and mutual funds, I also occasionally use actively managed funds for select categories (my favorite fund families are DFA, Vanguard, T. Rowe Price, Dodge & Cox). I build portfolios of mutual funds and ETFs and use individual stocks sparingly. Bond management: ETFs and mutual funds are also used, while individual bonds will be used if the portfolio size warrants.
7. How do you select the investment vehicles that will be used in my accounts? Do you rely on outside research or do you do your own research, or a combination? What causes you to sell a security/fund in my account?
I conduct research on all investment vehicles using the widely regarded security database maintained by Morningstar. I screen for expenses, turnover, manager tenure, performance, and tax efficiency among other characteristics. I will sell a fund or ETF if one of the attributes changes dramatically and I become uncomfortable with the fund’s prospects (due to asset bloat, poor performance, manager turnover, etc.).
8. Where do you stand on the concept of market timing? During the steep decline of 2008 – 2009, how did you handle nervous clients and what did you recommend for their portfolios during this time?
I do not believe in market timing. I recommended that clients hold on during the decline of 08-09. Those few who bailed missed the turn and the steep increase that came quickly and unexpectedly in early 2009.
9. How often do you typically meet with clients like me? How long do these meetings last? What is covered in those meetings?
During the first year, I would like to meet at least quarterly to review account performance, structuring, any transactions made, and to provide ongoing education. I also need to know what is going on in your life! Ultimately, we can schedule meetings on an as-needed basis but after the first year, I’d like to meet at least 2 times per year, and preferably 4.
10. How frequently do you contact clients like me in-between meetings? How long does it take you to return calls from your clients?
I call or email clients regularly (6-12 times per year) to touch base, unless I hear from them first. My goal is to return calls from clients within 24 hours. My current clients have told me I am very responsive to their needs. (References available upon request.)
11. Are there any other forms of communication that you use regularly to keep in touch with your clients?
Yes. All clients receive a written, quarterly Portfolio Review, which includes a variety of reports providing information on the account(s) being managed. I write an occasional blog which might include market commentary, articles of interest, or news items related to women.
12. How are you paid? How does your compensation method differ from others in the industry, like brokers?
BTA is a "fee-only" advisor. This means we earn our fees only from our clients, not from commissions, kickbacks or “soft dollars” received from any other parties. Brokers, on the other hand, may be entirely commission-based, or fee-based, which could include both commissions and fees. (The client or investor pays the brokerage firm its various fees, and then the brokerage firm pays the broker its share of commission or other fees.) It is oftentimes difficult to tell how much you are paying to a broker, in total, as their fees can come from various sources and can also be well-hidden. BTA provides a quarterly invoice clearly spelling out exactly what you paid to us and how it was calculated.
13. What would be my annual fee if we worked together, including transaction charges and any other fees?
The annual fee is based on assets under management and starts at 1% (and declining with higher asset levels), with a one-time, account set up fee of a flat $500. As an example, if you have a portfolio of $500,000, the first year fees (payable quarterly) would amount to $5,000 ($500,000 x 1%) plus the account set up fee of $500, for a total of $5,500. The investment vehicles utilized are among the lowest cost products in existence, and TD Ameritrade is a discount brokerage so transaction costs, if they exist at all, are minimal.
14. What services do you provide yourself, and what services do you outsource?
I provide most of the analytical and client-focused services, however, I use an external database provider, investment management reporting service and database (Morningstar), and a discount broker (TD Ameritrade) to assist in our activities.
15. What happens if you get hit by a bus?
Clients’ accounts are held (custody) at TD Ameritrade and BTA has only a power of attorney to trade in the accounts. The accounts are always available to each client via TD Ameritrade, both online and at any branch. My goal is to educate clients on how to manage their accounts so ultimately they could do it on their own if necessary. But if I were hit by a bus, TD Ameritrade could refer you to another financial advisor if necessary.
16. Where is your office located?
We are located on the second floor at One S. Main Street in Chagrin Falls, Ohio.
17. What are the advantages / disadvantages to working with a sole proprietor?
Investors sometimes believe they need to work with a large institution in order to benefit from the "tremendous" resources behind it. The failure of many big institutions in 2008 hopefully put that myth to rest. Having been at one of these firms during that time, I can tell you that many of the employees were not focused on their jobs (or clients) as much as they were concerned with their own employment prospects. As a smaller firm, we are nimble enough to adapt to new technology, respond quickly and make necessary changes quickly, without having to go through a “committee” or other lengthy approval processes. A few disadvantages to working with a sole advisor are: 1) one advisor cannot know everything, though one advisor may be able to track down the information quickly; and 2) if the advisor goes on vacation and you need something, it may be hard to reach the advisor, though with all the communication devices available today, it seems reasonable to believe the advisor could be reached anywhere in the world relatively quickly.
18. Do you have any clients who would serve as references?
Yes, all of my clients have said they are willing to talk to a potential client about what it is like to work with BTA.