Here are some of the most frequently asked questions I get*:
Q. What if I inherited financial professionals from my family and don’t want to continue working with them?
A. If you don’t like their personality, values or investment style, find someone else. Remember, it’s your money now and you need to do what is right for you. You may find it more difficult to dismiss advisors who are old family friends but, if you tell them honestly that you want to choose your own advisor, most likely they will wish you well.
Q. Do I have to sign a contract with my financial advisor? I’m afraid of getting myself into something I can’t easily get out of.
A. You will have to sign a contract with any investment advisor or brokerage firm to do business with them. The inviolable rule, of course, is never to sign any document you do not thoroughly understand. Always take your time and if any point is unclear, ask questions. For extra protection, you should review the contract with a knowledgeable friend or attorney before signing it.
Q. Every time my advisor calls suggesting that I buy something, I think to myself does she really believe this is a good investment or is she just after a commission?
A. If you feel unsure about the motives of an advisor working on commission, you need to ask yourself: Do I generally suspect people are trying to take advantage of me, or is there something about this particular advisor that makes me uneasy? If you tend to worry that people are more interested in your money than in your welfare, use this as an opportunity to examine when those feelings are justified and when they aren’t. If you think the problem is with the advisor, discuss your concerns with that person, and then review the reasons for your concerns and the advisor’s responses with a trusted friend or professional. And, of course, you can switch to a fee-only financial planner or a wrap account that’s inclusive of all fees.
Q. What if my advisor pressures me to buy something?
A. If someone tells you, “Buy this now—the price will never be this low again,” or, “This stock will hit 100 in six months,” your antennae should go up. Never buckle under pressure. Think seriously about changing advisors. As one money manager put it, “There’s always another stock and there’s always another day.”
Q. The value of my portfolio is going down instead of up, and I think my broker is at fault. Is there any chance I can recover my losses?
A. Yes. If your broker or other investment advisors have recommended unsuitable investments and failed to explain their risks, churned your account, or bought securities without your permission, you can file a claim against them. Your advisor is generally required to settle the dispute by arbitration. I suggest you discuss your case with a lawyer or other professionals who represent clients in disputes with brokers.
Q. What if I want to change advisors?
A. Before you walk away, give your current advisor a chance to respond to your complaints. Sometimes just hearing the other person’s explanation can clear the air and preserve a working relationship. If, after you’ve talked you still want to take your business elsewhere, find a new advisor who will arrange to transfer your investments for you. Then tell your advisor you want to close your account. Switching brokers should be a simple process, especially if all your holdings are commonly traded stocks, bonds, and mutual funds that are easily moved from one brokerage firm to another. Simply fill out a form listing all the investments you held at the old brokerage firm and give it to the new broker who will take care of everything else. If you’re changing money managers, the process can be slightly more complicated. Often money managers will give you a pro-rated refund and retain a fee covering 30 days.