Monitoring Your Financial Adviser
By: Source: AARP.org Date Posted: 2005-03-20 12:08:57
Just because you hire a financial planner or broker doesn't mean you can sit back and relax. Remember that you are still in control of your money, even if you hire an expert to help you manage it. You need to ask questions about your adviser's recommendations. And, you have every right to reject those recommendations if you wish. You also have a responsibility to monitor your adviser's actions and make sure he or she has your best interests at heart.
What You Should Know
Track Your Returns Carefully
Most good brokers and financial planners will give you periodic reports that show the rate of return earned on your account. This report should include your "real" rate of return - that is, your return after you have paid the adviser all fees and commissions. Some reports also include the real rate of return earned by investments that are similar to yours, called a benchmark. Having this benchmark helps you compare your returns with the returns that other investors are getting. If your adviser isn't giving you this kind of information, find out why.
Having information about your real rate of return helps you see how well your broker or financial planner is managing your investments. Your adviser should be able to match or beat a fair benchmark over the course of a year or two. If this doesn't happen then it's your right to find another adviser.
Read the Account Statement
If you are not getting a report that includes your real rate of return, you are probably receiving a monthly account statement. This statement shows how much your investments are worth. Be sure to track how your investments are doing and what they're costing you. In addition:
Ask for a monthly accounting of the total gross commissions earned on your account. This is part of the regular reports that every broker and financial planner receives from his or her firm. There is no law or regulation to prevent your adviser from sharing this report with you. If the adviser refuses to give you this report, you might consider finding a new adviser.
Contact your adviser's supervisor if you see transactions on your statement you didn't authorize. Don't wait to see how the investments perform. Waiting may be viewed as giving your approval to the unauthorized trades. You should also contact the your broker's supervisor if your broker or financial planner appears to be trading excessively.
For More Information
National Association of Personal Financial Advisors (NAPFA)
NAPFA's brochure "Working With a Financial Adviser" provides criteria to consider when shopping for a financial adviser, along with some details about what you can expect from the client-adviser relationship. It is available online at the NAPFA Web site. From the association's home page, click on "Consumer Services" and then follow the links in the left-hand column.
URL: http://www.napfa.org
Certified Financial Planner (CFP) Board of Standards
The CFP Board of Standards publishes "Your Rights as a Financial Planning Client," which describes the kind of treatment you deserve from your financial planner.
URL: http://www.cfp.net
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