Are You at Risk With Your Current Advisor?

Q: Have you done a background check on your broker or advisor? 

Checking the background of your broker or advisor is simple and is very beneficial to your financial health.  To get started visit http://www.sec.gov/investor/brokers.htm.  If you find any negative entries against your advisor, be sure to request a written explanation for the details surrounding the event(s).

Q:  Do you have a written agreement with your broker or advisor?

A written agreement or contract is an important tool that helps you understand the limitations and responsibilities of the broker or advisor.  It also clearly defines your goals and expectations usually found in what’s called an Investment Policy Statement (IPS).  An IPS is a personalized document that defines goals, time horizons, risks, allocation percentages and other guidelines used to invest your money.  These written arrangements are mandatory if you are working with Registered Investment Advisor such as Ballheim Financial LLC.   

Q: Do you know exactly how your broker or advisor is compensated?

The structure of compensation arrangements in the financial industry is our top criticism.  Each compensation structure, whether it is commission-based, fee-only, fee-based or performance-based has its own unique characteristics to investors.  Some of these characteristics are beneficial to investors, some detrimental.  It’s important that you know exactly how your broker or advisor makes money to identify any conflicts of interest within your relationship. 

Q:  Does your broker or advisor disclose to you the amount of compensation they receive for each financial transaction?

It is highly unlikely that your broker or advisor will disclose the actual compensation they receive from facilitating a trade unless you ask them directly.  However, this can be one of the most valuable questions you can ask your broker or advisor to expose any potential conflicts of interest in your relationship.  Commissionable products may not be the best value to you as an investor. 

Q:  Has your broker or advisor acknowledged fiduciary status with you in writing? 

A fiduciary is a person or entity that is held to the highest standard of trust.  An investment fiduciary has the legal responsibility to place the investor’s interests ahead of their own.  Most brokers and many advisors are not fiduciaries.  Simply put, they are not willing to accept the higher standards associated with being an investment fiduciary.  As an independent Registered Investment Advisor (RIA), Ballheim Financial LLC is a fiduciary and does acknowledge that status in writing with each client. 

Q:  Has your broker or advisor explained the total of all fees and expenses associate with their services and investment selections?

It is very important to know what the total fees are within your investments in addition to any service related expenses.  Some fees and expenses show up on your monthly statements while others are nearly invisible to detect unless you know the right questions to ask.  Remember, the less the overall expenses are, the higher the overall return will be. 

Q: Do you believe that your broker or advisor has taken the time to fully understand you and your financial goals prior to making financial recommendations?

The better your broker or advisor knows you, the better equipped they will be in making their financial recommendations.  Often times it can take several meetings before an advisor with your best interest in mind would be willing to make any concrete recommendations.  Did they request to see your tax return?  Did they have you bring in all of your other brokerage account statements?  Did they request to see your life insurance statements?  If not, you may be working with a financial salesperson or broker and not an investment advisor willing to act as a fiduciary to you.