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Researching financial advisor

So a friend wants to put his money with a financial advisor who wants to charge 1% for the privilege.

First, let me make it clear, and it shouldn't be so hard to believe, I'm not asking for myself saying "a friend...". I am actually trying to help out a friend in spite of himself.

So is there some place I can go and plugin the name of the advisor company and then advisor and figure out if these guys are legit? I'm thinking there must be some website like that.

Comments

  • You can get info on advisory firms and advisors from the SEC site:
    https://www.adviserinfo.sec.gov/IAPD/IAPDSearch.aspx

    You should dig down for the form ADV Part 2

    For brokers (as distinguished from advisors), you can use FINRA's search here:
    https://brokercheck.finra.org/
  • I would just send him to Edelman

    yes, this is nonresponsive to your query

  • These days I'd definitely make sure they're a RIA and not a broker. When it comes to products, advice, and service the former has customer's best interests in mind; the 'broker' has their firm's best interests in mind. (although there are always exceptions to this sentiment)

    One small RIA firm stocked by advisors I trust based primarily on their down-to-earth commentaries over the years is run by Barry Ritholtz up in NYC. If I didn't already have a very low-cost RIA handling one of my long-term accounts already, and if I wanted a broad-based allocation strategy, I'd probably consider them.
  • msf gave very good advice. The ADV Part 2 will provide information on whether the company and individual receives commissions. Sometimes the RIA or planning company can say they do not receive commissions, but there may be one or two other subsidiaries owned by the main company or one of the company owners, and those companies may sell insurance and annuities, or to operate their own brokerage firm. It is very important the ADV document contain language indicating the company is a "fee-only" firm. The document will also detail what services the firm offers, what custodian they use (Schwab, TD, Fidelity, etc.), what their fees are (are they negotiable?). There must be a brief section that outlines any way the company is compensated for selling products. Look for "Neither (name of the RIA) nor its advisors accept compensation from the sale of securities or other investment or insurance products." The document will also have a section that must list any disciplinary actions to which the company has been a subject. Look for a section on industry activities and affiliations, and confirm the company is not affiliated with any broker-dealer, bank, or insurance company. Look for the company's Code of Ethics to see if it accepts fiduciary responsibilities. This is the biggie.

    Your friend should work with a firm that treats him/her as an individual, not just one of thousands of clients. There are many ways to do an initial look by googling "fee-only financial planning", "fiduciary planning", "registered investment adviser" (note the spelling of "adviser"...that's how the government spells it). The company's web site should have direct links to its ADV, Code of Ethics, and any Disclosures it deems important. This is a lot to do, but we are talking about YOUR money.

  • I would just send him to Edelman

    yes, this is nonresponsive to your query

    that's fine, but at the very least you need to provide an explanation of your joke, because I didn't get it:-)
  • ?
    it's a solid outfit that gives good and prudent service and advice, as you can tell from the lead guy's radio show, and would obviate the need for research
    http://www.edelmanfinancial.com/
  • msf
    edited August 2017
    Edelman's wrap account (EMAP - Edelman Managed Asset Program®) starts off charging 2% for the first $150K in retail accounts, gradually reducing fees on additional moneys until they reach 1% on amounts in excess of $750K up to $1M. It then charges 0.75% on the next $2M. To achieve a blended rate of 1%, you'd have to have $2.6M invested with them.

    The lead guy may be good and prudent, but for that kind of money for a wrap account I'd expect them all to walk on water. In a firm this size (around $18B AUM, 300 advisers, 32K clients [nearly all individuals], 77K total accounts), it seems one would still need to do research on the potential individual adviser within the firm.

    Spending a little time on research to save thousands of dollars in fees looks like time well spent. As always, YMMV.
  • I've known good and bad. One of the best is in my small rural town of 14,000. Not a popular opinion but being a big believer in transparency I think investment advisers' personal accounts should be part of the equation. If they cant manage their own money why have them manage yours. Were I an investment adviser my 1040s/brokerage statements would be an open book.
  • If your friend is most interested in getting his financial house in order and piece of mind that results from that but not being saddled with continuous payments to an adviser, a fee only adviser might be a good option. He/she can continue that advisory connection as needed.

    The National Association of Personal Financial Advisors
    https://www.napfa.org/
  • Unfortunately, this will limit the search considerably, since most fee-only advisors/planners choose not to belong to NAPFA, above.
  • @BobC- That's interesting... any idea why?

    Thanks- OJ
  • Hi Guys,

    Thank you all for this informative exchange.

    Here is a Link that discusses " a dirty little secret " about investment advisors that is not very secret whatsoever:

    https://www.forbes.com/sites/robertberger/2016/12/19/the-dirty-little-secret-investment-advisors-dont-want-you-to-know/#afaf3bc6f966

    I hope this Forbes article adds to the various points already presented.

    Best Wishes

  • BobC said:
    Unfortunately, this will limit the search considerably, since most fee-only advisors/planners choose not to belong to NAPFA, above.
    That may be true Bob, but if I type in the Columbus Ohio area, there are almost 25 advisers to choose from within a 20 mile radius. If I type in Pittsburgh there are are 31 within 30 mile radius. That is a pretty good starting point.
  • msf said:

    Edelman's wrap account (EMAP - Edelman Managed Asset Program®) starts off charging 2% for the first $150K in retail accounts, gradually reducing fees on additional moneys until they reach 1% on amounts in excess of $750K up to $1M. It then charges 0.75% on the next $2M.

    Talk about a scam. F***in 2%... Really!?
  • MJG said:


    Here is a Link that discusses " a dirty little secret " about investment advisors that is not very secret whatsoever:

    https://www.forbes.com/sites/robertberger/2016/12/19/the-dirty-little-secret-investment-advisors-dont-want-you-to-know/#afaf3bc6f966

    Each year you post conclusions from Dalbar's QAIB study, e.g.: 2011, 2012 (where you acknowledged that "perhaps hiring a financial advisor would provide some needed relief"), 2013, 2015 (okay, Ted posted this one), 2016 (where you wrote that "Given the huge disparity between market Indices and individual investor actual performance, a case can be made for consulting a financial planner.")

    I'm no enthusiast of the Dalbar reports. See, e.g. Prof. Snowball's comments in the 2015 link, or this 2017 analysis by Wade Pfau: "Investors may behave badly. But the DALBAR study does not demonstrate this empirically. Its calculations are wrong and the financial services profession should stop using it as a way to market the value of financial advice."

    But Dalbar is where you've chosen to hang your hat. In doing so, you have you acknowledged that a 1% advisor fee can generate net positive results for average investors (directly contradicting Forbes' "dirty little secret").

    Regardless of your comments about the Dalbar conclusions, that conclusion easy to extract directly from the Dalbar data (to the extent that one trusts Dalbar's methodology). The 2016 version (the latest version that seems to be available "for free") states that "Voluntary investor behavior underperformance" amounts to 1.50%. That is more than enough to overcome a 1.00% fee paid to an advisor who helps an investor correct this bad behavior.

    Even Vanguard has published a series of papers stating that "Paying a fee for advice and guidance to a professional who uses the framework described here can add meaningful value compared to the average investor experience." That's from the 2016 version of Vanguard Advisor’s Alpha®

    If the whole paper's too long to read, here's a Marketwatch column ("Vanguard: When advisers add value") from 2013 discussing the Vanguard report.

  • Hi msf,

    Thanks for your detailed review of my earlier postings. I surely do not remember them. I do like the DALBAR summaries. They do useful work.

    Like most investment decisions, the usefulness of a financial advisor depends on the individual investors who might positively deploy their services. No single size fits all Investors. Some of us need them, but many others do not. And those assessments themselves are subject to huge errors. A carefully documented scorecard helps to resolve those poor self assessments.

    Thanks once again.

    Best Wshes


  • edited August 2017
    MJG said:

    Hi msf,
    Thanks for your detailed review of my earlier postings. I surely do not remember them. I do like the DALBAR summaries. They do useful work.

    You have completely missed the point and are on autopilot in generic self-defense mode:

    See, e.g. Prof. Snowball's comments in the 2015 link, or this 2017 analysis by Wade Pfau: "Investors may behave badly. But the DALBAR study does not demonstrate this empirically. Its calculations are wrong and the financial services profession should stop using it as a way to market the value of financial advice."
  • edited August 2017
    @davidrmoran- You sound as if you were expecting something else.
  • I am an FA with mostly fiduciary practice. one needs to understand that not everyone is as sophisticated as some contributors to this forum. I see PhD's and MD's who sit in concentrated positions of their company's stock or have other broker relationships that fill them with annuities and mutual fund C-shares. so you might want to demolish the industry all you want, but many find real value in financial planning and guidance and are willing to pay the extra 50 bps (over robo-advisors) for a 1% fee that includes not just money management, but also tax evaluation, withdrawal recommendations, and an impartial advice on all other financial issues -- trusts, adequacy of insurance, home borrowing, etc.

    please do not be vile in your responses, even if you don't believe in the industry.

    respectfully, fa
  • MJG
    edited August 2017
    Hi Fundalarm,

    I completely agree with everything that you said in your excellent post. I not only concur with the general thrust of your comments, but with every single claim. Your profession does provide a useful and meaningful service to many investors.

    When I started to invest in circa 1960, I knew very little of market mechanisms, realized my many shortcomings, and employed a financial advisor. He not only provided a needed service, he was also a superior teacher.

    After a few years I gained sufficient knowledge and confidence to do my own investment sorting and decision making. I still apply many of the lessons and bits of wisdom that he taught me. In no way do I regret that learning experience. That advisor definitely earned his pay.

    I fully understand your cautionary comment that closed your post. There are a few MFO members who harbor deep personal grudges for unspecified and unreasonable reasons. Pity these poor souls! Their comments are easily discounted and discarded.

    Best Wishes for your continued success in helping hapless investors. They do exist, even on this fine website.
  • ?
    it's a solid outfit that gives good and prudent service and advice, as you can tell from the lead guy's radio show, and would obviate the need for research
    http://www.edelmanfinancial.com/

    Ok, if I'm supposed to know this I'm sorry. For some reason I only remember the bad ones. This must be a good one.
  • So guys, back to my question. I'm searching on the IAPD site. So this seems to be website where advisors can provide THEIR information.

    How do I find if something bad has been reported against Advisor Company/Advisor? And is no news good news? There's nothing much on that website.
  • The user and all related content has been deleted.
  • @VF
    >> This must be a good one.

    It is a good outfit, but, as msf pointed out, excessively expensive.

    Some more checking resources:

    https://www.thebalance.com/financial-advistors-credentials-2388438

    http://www.campaignforinvestors.org/have-other-investors-filed-complaints-against-my-financial-advisor/

    From quick googling, so perhaps you are aware.

    I do not use Edelman myself, never have, and have no other connection; just a radio listener.

    @Maurice

    You would have to listen to the show several times to get the nuance of what RE is saying, the soft sell, the offering of impartial advice, the disinterestedness. You 'hard time' is understandable.

  • For any registered advisor, FINRA form U4 will have all information. Google"Broker Check".

    So guys, back to my question. I'm searching on the IAPD site. So this seems to be website where advisors can provide THEIR information.

    How do I find if something bad has been reported against Advisor Company/Advisor? And is no news good news? There's nothing much on that website.

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