How to Monitor Current Financial Advisors
Very few investors have processes in place that monitor the performance of their advisors. Consequently, advisors are in a postion to monitor themselves, which means they control what investors do and do not see.
It is smart to assume no advisor will volunteer information that would cause you to terminate the relationship. They withhold the information and make it your responsibility to uncover it. It is up to you to ask the right questions and know good answers from bad ones.
You can develop your own process or use Paladin’s FREE quarterly monitoring process. We ask the right questions for you and document the advisor’s responses in your Paladin User Account.
Think of Paladin’s performance monitoring service as your early warning system. It helps you avoid being blindsided by problems after it is too late to act. The sooner you identify the problem, the sooner you take action to protect your financial interests.
Monitoring reduces advisor control over information and makes them more accountable for communicating factual information and producing competitive results for reasonable amounts of risk and expense.
Real financial advisors provide performance reports that show your absolute performance. The reports may also include the performance of various indices that may or may not apply to your situation. A better solution is to select a FREE Paladin Performance Benchmark and compare your performance to the results that are produced by a Benchmark that reflects your particular situation, return objective and tolerance for risk.
Expenses are dollars that are deducted from your investment accounts. Every dollar of expense is one more dollar you do not have available for reinvestment for your future use. You should monitor expenses and compare them to the services you are receiving and the performance that is produced by your advisor’s recommendations.
You have a stated tolerance for risk. Your advisor’s recommendations should be within your stated tolerance for risk. You should know if your exposure to risk begins to rise over time. This provides time to respond and reduce risks that make you uncomfortable.
Did your advisor receive any new client, company, or regulatory agency complaints during the quarter? These complaints could be frivilous so you can ignore them. Or they can be serious breaches of ethics that may impact you. At a minimum, you should be aware of them so you can take the appropriate actions.
What if your advisor began losing an unusually high number of clients every month? Perhaps these clients know something you don’t know. At a minimum, you would want to know this is happening and why it is happening.
Bankruptcy & Foreclosure
These types of actions may impact the financial stability of your advisor. What if he starts recommending investments that make him the most money? How can he provide high-quality financial advice when he cannot manage his own personal affairs?