Welcome to Lesson #5 of "5 Big Ways Your Financial Advisor May Not Be Acting In Your Best Interests"

Setu Mazumdar, MD, CFP® The Financial Planner For Doctors

Setu Mazumdar, MD, CFP®

The Financial Planner For Doctors

Congrats! You've made it to the last day of my free report. Today's session is incredibly important because I'm going to give you a really valuable tool you can use.

Over the past few days I've given you several examples of ways in which financial advisors -- perhaps even the one you are currently working with -- may not be acting in your best interests.

I've shown you the difference between a financial advisor who is held to a fiduciary standard versus one who is not.

I've shown you how selling you permanent life insurance policies such as whole life policies might not make sense given the alternatives.

I've shown you how certain types of annuities are not what they're cracked up to be.

I've shown you how your advisor may be playing games with you by selling you mutual funds.

And I've shown you how your financial advisor might be gambling with your money rather than creating a well thought out investment plan.

The Fundamental Problem With Many Financial Advisors

All of these examples really boil down to one fundamental problem with financial advisors who are not fiduciaries: lack of disclosure.

More specifically:

1. Lack of disclosure about what fees you are being charged and paying

2. Lack of disclosure about conflicts of interest the financial advisor may have and the quality of the advice he's giving to you

Think about it this way: when you bought your last car, did you look at the price you paid for it? I bet you did. If you didn't, then you've got so much money in the bank that you don't need to worry (for most physicians that's doubtful).

Or think about medicine today. Most people -- because of the way medical insurance works and all the government regulations -- have no idea what they're really paying to physicians and hospitals.

I'm not necessarily saying that you should look for the absolute lowest fee advisor out there. Lowest fee does not mean best service. In my opinion it's very difficult to have an ongoing personal relationship with you and provide good service for a low fee.

The way I look at fees is that the fee must be fair to both you and the advisor. A good financial planner who spends time with you, delivers quality advice and service, and adds significant value to you can't charge really low fees because the only way to make up for that is volume -- the advisor would have to take on many more clients and then the service to you drops.

What I am saying is that if you don't know what you're paying and who is paying the advisor, it puts you at a significant disadvantage and is not fair to you. If you've hired a commission based financial advisor who is not a fiduciary and has not disclosed fees, that's not fair.

That's about to change -- because I've prepared a checklist of point blank questions to grill your advisor with and find out the truth.

If you are currently working with a financial advisor and you've got a queasy feeling in your stomach especially after reading my report, use my checklist and ask him these questions. I bet you his sphincter tone will shoot up because no client has ever done this before. Or if you are thinking of working with a financial advisor use this checklist before you hire anyone so you know what you're getting into.

Here it is...

Grill Your Financial Advisor:

A Checklist To Find Out The Truth and Expose Hidden Fees

 

1. Are you a true fiduciary who is legally required to act in my best interests?

2. If you are a true fiduciary, please sign a written fiduciary oath stating that you are a true fiduciary.

3. Is your firm registered with the Securities and Exchange Commission (SEC) or the state equivalent as a Registered Investment Advisor (RIA)?

[Advisors who are registered with the SEC or the state regulatory agencies are required to be fiduciaries. However be careful because many advisors are dual registered with the SEC and with another regulatory agency and could still sell you products for a commission]

4. If I hire you, how do you get paid?

5. Do you receive any monetary compensation from any other source besides me? If yes, what sources?

6. Do you receive any monetary compensation from selling insurance products, mutual funds, or any other investment or financial products? If yes, list the sources and the amount of compensation.

7. Do you receive any monetary compensation from insurance companies, mutual fund companies, or any other entities? If yes, list the sources and the amount of compensation.

8. Do you receive any referral fees? If yes, from whom and how much?

9. Do you receive any non-monetary compensation (vacations, gifts, incentives, bonuses and such) from any other source besides me? If yes, what sources?

[Financial advisors can receive non-cash compensation so it's important you ask this question]

10. Do you receive any non-monetary compensation (vacations, gifts, incentives, bonuses and such) from selling insurance products, mutual funds, or any other investment or financial products? If yes, list the sources and the amount of compensation.

11. Do you receive any non-monetary compensation (vacations, gifts, incentives, bonuses and such) from insurance companies, mutual fund companies, or any other entities? If yes, list the sources and the amount of compensation.

12. What is your investment philosophy?

13. Do you or any money managers you work with engage in stock picking or market timing?

[If the financial advisor uses individual stocks, you might not have enough diversification. It takes thousands of stocks for effective diversification]

14. Do you use index funds or actively managed funds?

[Actively managed funds attempt to beat the market averages through stock picking, market timing, or both. Academic studies show that actively managed funds underperform index funds so do not hire a financial advisor who uses actively managed funds]

15. Do any of the funds you recommend pay you 12b-1 fees?

[12b-1 fees are ongoing commissions paid to the financial advisor annually by the funds and may represent a conflict of interest. There is very little reason to use mutual funds with 12b-1 fees]

16. If you are paid directly by me, what is the fee structure?

17. What is the custodian you use for my accounts?

18. Are there any annual account maintenance fees at the custodian?

19. What is the transaction cost to buy and sell securities at the custodian?

20. What is the average annual expense ratio of the mutual funds you use?

[Generally you want the average expense ratio to be less than 0.5% annually and ideally less than 0.3% annually]

21. Do you manage investment portfolios only or do you also provide comprehensive financial planning?

[My belief is that a good financial advisor should not just manage your investment portfolio but should also provide objective advice in all major areas of financial planning]

22. Is there a separate fee for financial planning on top of the investment management fee? If so, what is the fee?

23. List any potential conflicts of interest you have.

24. Show me your regulatory disclosure documents. Do you have any disciplinary actions against you?

25. Show me your own personal investment portfolio.

[It's a red flag if a financial advisor doesn't invest his own accounts in the same way he wants to invest your accounts. For example if he's touting all the great "benefits" of annuities and whole life insurance to you, then you should be buying the same products for himself]

Your Next Step: Set up FREE Financial Coaching Session

So there you have it -- achecklist to put your financial advisor on the hot seat and get some honest answers.

I hope you've enjoyed my free report and you've learned a lot about the way many financial advisors operate and how they might not be acting in your best interests. I doubt any financial advisor has been this upfront and revealed to you what goes on behind the scenes.

I'll keep in touch with you by sending you my weekly "No BS" financial lessons to whip your finances into shape.

If you feel like your financial advisor is not giving you good advice, is not acting in your best interests, is not communicating with you, or if you are tired of managing your finances by yourself, there's a huge bonus I'd like to give you: set up your FREE Financial Coaching Session with me.

The Financial Coaching Session is not a sales pitch. It's a chance for us to sit down in a relaxed phone conversation and learn about you situation in more detail, give you an overview about how I may be able to help you, and figure out whether we're a good fit to work together. It's at least a $1,000 value.

We'll go up and down your finances, point out mistakes you or your financial advisor are making, and create an action plan so you can start making work optional.

All you have to do is click on the link below and set up a time with me. It's that easy. Do it right now:

Talk to you soon.

Making Work Optional For Doctors,

Setu Mazumdar, MD, CFP®

The Financial Planner For Doctors