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Savvy Investing: How to Choose An Investment Advisor

June 20, 2016
John Portwood
John Portwood

Finding a reliable source for investment advice always has been a challenge. It’s especially tricky in today’s complex investment environment.

There’s no shortage of places to turn to for advice. The shelves at bookstores are filled with works from “experts” offering their perspectives as to how, where, and when to invest. The Internet and the financial pages of newspapers and magazines are crowded with articles and advertising hype. Not to mention family members and friends with their particular brand of wisdom.

Here are several suggestions to help you in your quest to find the right investment advisor for you:

Interview Extensively

Parents who hire a nanny for their children talk to many applicants and are scrupulous about checking references. You should be no less careful when entrusting your money to a stranger.

You should expect that the investment advisor you choose will undergo a thorough study of your financial picture, your tax situation, and your long-term goals. He or she will develop a custom-tailored investment strategy based on these factors and select the investments to implement that strategy. Your advisor should monitor your holdings, making changes or new recommendations whenever new developments appear to make changes desirable.

Look For Depth

You will want to look for someone with considerable experience and a solid theoretical background as well as real-world practice in investment management. Your advisor should be able to draw upon a wide variety of investment choices, not just a family of mutual funds.

You should feel comfortable talking to your advisor. Make sure that he or she listens to you. A successful investment management relationship is based on clear and consistent communication.

Test the advisor with a few questions. For instance, ask the advisor about his or her approach to investing. Is that approach plainly expressed and articulated? Does that philosophy match your own?

Understand the Compensation Structure

Having a firm grasp of how your investment advisor is compensated may well be the single most important issue for you to understand. Stockbrokers, for instance, are typically paid commissions based on the number of trades executed for clients. So brokers are transaction-driven; the greater the number of trades that they make, the greater their compensation.

Financial planners are another source for investment advice. Their recommendations may carry a fee, or, more likely, they earn commissions when the products that they recommend are purchased. Some financial planners earn fees both ways.

Many financial institutions charge annual fees for investment services, and the fees are based on the amount of assets under management. A graduated fee schedule usually is employed, which means that larger accounts pay lower fees, on a percentage basis, than smaller accounts. Similarly, investment counselors or advisory firms impose a percentage fee, based upon the amount and type of assets being managed.

Some brokers and commission-based financial planners may have an incentive to encourage frequent investment trades to increase their compensation. With a fee-based manager, compensation rises and falls along with the value of your portfolio. The advisor can prosper only if you do.

Additional Pointers

Look for someone who offers personalized service. Some accounts, for example, require an investor to review an assortment of model portfolios created by different money managers and to choose the one that’s closest to his or her needs. An investment advisor should be available to review your needs and preferences in detail, and then tailor investment selections accordingly. As your situation changes, appropriate adjustments to your portfolio can be made.

Hancock and Whitney Investment Services professionals are ready to help you achieve your financial goals and dreams. Learn more about our products and services and get started today.

Securities are offered through Hancock Investment Services, Inc., known and doing business as Whitney Investment Services, Inc. in Texas and Whitney Investment Services, and not through Whitney Bank. Hancock Investment Services is a registered broker/dealer, member FINRA/SIPC, and a wholly owned subsidiary of Whitney Bank. Insurance products are offered by various insurance company affiliates of Hancock Investment Services, Inc.

All investments are subject to risk, including the possible loss of the money you invest. This information is provided for educational and illustrative purposes only.

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