If you are looking for best in class asset management, you are unlikely to find it at an RIA. The key is that they are competent and help you make investment decisions that are consistent, disciplined and appropriate for your situation.
There is no substitute for comfort and trust. However, make sure you gain comfort and trust in someone who is competent and has the tools and experience to help educate and guide you to meet your financial goals. Before you fall in love or are sold on an advisor, make sure they have some very basic capabilities:
- An understandable asset allocation modeling with
- Automated rebalancing
- A wide selection of Investment options that are
- Fee efficient
- Fee transparent
- A clearly defined transparent fee structure without hidden downstream fees
- Reports that you can read and understand
- Personal cash flow spending analysis that shows how your future financial health looks
- Broad knowledge of all areas of financial planning, including investing, retirement, insurance, taxes, insurance, and estate planning.
- The ability to optimize for tax efficiency in investments.
In addition to the RIA firm capability, you want to understand if the person serving your needs is incented to remain with the RIA firm you choose. You should try to determine:
- Will the person likely be with the RIA in 5 years?
- If he’s not, does the firm have a way that your account and needs can easily be handled by another person?
- Is your representative incented in ways that would make his recommendations conflict with your best interest?
- Examples: are they primarily paid for selling insurance? Or for getting you into certain products like annuities?
A Registered Investment Adviser has an affirmative duty to act solely in the interest of the client. This is referred to as a “fiduciary” standard of care. Acting as a fiduciary, all considerations, decisions and transactions must be made exclusively for the benefit of the client, and any conflicts of interest must be fully-disclosed up front. While this is their legal duty, it is your duty to make certain that is the standard of care they actually employ. After you have confirmed all of this, go with your gut and choose someone you are comfortable with and trust.