Fiduciary/Registered Investment Advisor Questionnaire

Transcription

1 Fiduciary/Registered Investment Advisor Questionnaire Why do you need to Focus on the Fiduciary Standard and a Fee-Only Registered Investment Advisor? Because Fee-Only Registered Investment Advisors, adhering to a Fiduciary Standard, act in the client s best interests; registered to provide Investment Advisory Services and Investment Management. These advisors are Not Fiduciaries: Stock Brokers, Insurance Agents, Advisors, Financial Consultants, Wealth Managers or Registered Representatives; all who benefit from selling you an investment or financial product for commissions. Fee-Only Registered Investment Advisors adhere to a Fiduciary Standard and providing Investment Advisory Services and Investment Management. Do you want to know if your Financial Advisor, or prospective Financial Advisor, holds to a Fiduciary Standard and is a Registered Investment Advisor providing Investment Advisory Services and Investment Management? Find out the Facts! Use this quick questionnaire and compare the answers with the answer guide provided. It s your Money, become an informed investor, You ll be happy you did! Questions to Ask: 1. How are you and your firm compensated? Fee-Only Fee-Based Fee-Offset Commissions or Fee in Lieu of commissions brokerage account 2. Do you have a Written Investment Advisory Agreement and Form ADV Part 2 Brochure describing your compensation and Investment Advisory Services that will be provided in advance of the engagement? 3. If you, your firm or broker-dealer earn commissions, approximately what percentage of your firm s Commission income is derived from? % Insurance products % Annuities % Mutual Funds % Limited Partnerships or REITs % Stocks and Bonds % Fee in Lieu of commission brokerage account, (this is a form of commission) % Other: Explain 1 of 3

2 4. Does any member of your firm or Broker-Dealer act as a general partner, participate in, or receive compensation from investments you may recommend to me? 5. Do you receive referral fees from attorneys, accountants, insurance professionals, mortgage brokers, or others? 6. Do you or your firm receive on-going income from any of the Mutual funds, Variable Annuities or any Investment Products that you recommend in the form of "12(b)1" fees, "trailing" commissions, or other continuing payouts? 7. Are there financial incentives for you, your firm or your Broker-Dealer, to recommend certain financial products? (Such as: commissions, proprietary product sales, firm sponsored products with selling agreements, hidden fees, soft dollar arrangements, sales incentives, revenue sharing arrangements and sales trips, etc.) 8. Do you, your firm, your Broker-Dealer or Insurance Company create, sponsor, or underwrite any financial or investment products, like Mutual Funds, Annuities, Stocks or Bonds, Unit Investment Trusts or others, that are sold to your clients for commissions or fees? 9. Are you currently engaged in any other business, either as a sole proprietor, partner, officer, employee, trustee, agent or otherwise? (Exclude non-investment related activities which are exclusively charitable, civic, religious or fraternal and are recognized as tax-exempt.) 10. Will I have a Brokerage Account with your firm or an Investment Advisory Account? Brokerage Account Investment Advisory Account 11. Do you act as a Fiduciary and an Independent Fee-Only Registered Investment Advisor under a Money Manager capacity, who is responsible for actively managing our portfolio and investments, and making appropriate changes as necessary within our goals, objectives and risk profile, under a Registered Investment Advisory Agreement? 2 of 3

3 12. Will you sign the Fiduciary Oath below? FIDUCIARY OATH The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest which will or reasonably may compromise the impartiality or independence of the advisor. The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business. What the Fiduciary Oath means to you - the client I shall always act in good faith and with candor. I shall be proactive in my disclosure of any conflicts of interest that may impact you. I shall not accept any referral fees or any Commissions or any trailing compensation that is contingent upon the purchase or sale of a financial product. Signature Date Name Firm Name 3 of 3

4 Do Not Provide This Answer Guide to The Person Completing The Fiduciary Questionnaire. This is Your Answer Guide Only. The following answer guide will provide you with the recommended answers to the questions contained within the Fiduciary Questionnaire. By comparing the answers provided to you by the advisor with these recommended answers, you will be able to better understand whether or not the advisor in question holds to a Fiduciary Standard and is Registered to provide Investment Advisory Services. 1. How should a financial advisor charge for services? Strongly consider a Fee-Only Registered Investment Advisor. A Fee-Only engagement removes the potential conflicts of interest that are inherent in a commission relationship with a brokerage firm or insurance company. Fee-Only Registered Investment Advisors put their client s interests first and therefore hold to a Fiduciary Standard. A broker does not. 2. Prior to formalizing a relationship, a financial advisor should always provide you information which clearly discloses how she/he will be compensated: Fee-Only, Fee-Based, commissions only. Ask for this information prior to commencing a relationship, and if there are any corresponding conflicts of interest presented by the compensation arrangement. Be aware that your interests might not always be placed ahead of the advisors. A Registered Investment Advisor (RIA) is registered to provide Investment Advisory Services, a broker is not. If the firm you are working with or interviewing, does not provide A Registered Investment Advisory Agreement and a Form ADV Part 2 Brochure, you are NOT working with a Registered Investment Advisor and you do NOT have an Investment Advisory Account; you have brokerage account and a broker. Financial advisors who have no apparent conflicts of interest are more likely to be considered a Fiduciary. 3. You should consider using a Fee-Only Registered Investment Advisor to minimize the potential for conflicts of interest; you may instead select an advisor who accepts commissions. Financial advisors who are compensated based on commissions, should be able to explain how they are compensated and identify what percentage of their compensation is derived from the sale of various commission-based investment products and/or securities trading. Financial Advisors who do receive commissions but cannot account for how they are compensated, should raise serious questions from the consumer. Consider a Fee-Only Registered Investment Advisor to eliminate as many conflicts of interest as possible. 4. Ask your prospective financial advisor if she/he is limited to presenting certain types of investments or investment products to you. If so, inquire why she/he is limited, and how this might affect the success of attaining your goals and/or the amount of fees to be paid. 5. As you work with a financial advisor, other needs revolving around important financial issues will become evident. Certain advisors, for example, recommend attorneys, accountants, insurance agents, and mortgage brokers to their clients. You should inquire whether the financial advisor will receive a referral fee for the recommendation. If the financial advisor does receive a referral fee or some other type of compensation from the professional(s) that she/he may recommend to you, 4 of 3

5 you should seriously consider this conflict of interest prior to engaging the recommended professional. Financial Advisors receiving a referral fee from other professionals for referring your business may not be acting in your best interests. A true Fiduciary will not receive any compensation from any outside sources. 6. Some mutual funds and investment product sponsors pay 12b(1) fees and similar fees. A financial advisor who receives 12(b)1 fees or trailers is not a Fee-Only Financial Advisor. Trailing fees may negatively affect you, because typically the product sponsor charges shareholders higher fees and then pays a portion of the money to the financial advisor on an ongoing basis. Utilize A Fee-Only Registered Investment Advisor to ensure a Fiduciary relationship. 7. Commission-based advisors may receive higher commissions on certain products they sell than on others. This may influence their decision to recommend investment products that are not in your best interest. Ask your prospective financial advisor how his/her recommendation might affect the success of attaining your goals and/or the amount of fees to be paid. Fee-Only advisors do not have this conflict of interest; they are able to recommend investments based solely upon your specific needs. Utilize A Fee-Only Registered Investment Advisor to ensure a Fiduciary relationship. 8. Many large and small Brokerage Firms and Insurance Companies create investment products that Their Brokers are required to sell. Even though there may be a much better investment for your needs, a Commission Advisor may have to (and is more likely to) sell their firms sponsored or created investment products. This means your interests are sent to the back of the line. Many of these investment products have High Internal Yearly Fees, Huge Commissions, Front-End Commission and Back-End Sales Loads, and may not be in your best interest. Utilize A Fee-Only Registered Investment Advisor to ensure a Fiduciary relationship. 9. By knowing what other business ventures a financial advisor is involved in, you will better understand if there are any conflicts of interest with regard to the advice that you might receive. This is especially important if the advisor is involved with any other investment-related entity. Ask for a detailed account of how that relationship will impact the advice she/he will provide you. The outside relationship may be in conflict with your personal interests. 10. A Brokerage Account is NOT an Investment Advisory Account; more than 9 out of 10 investors have a brokerage account. You want an Investment Advisory Account, not a brokerage account. This is a BIG Difference. If you work with any brokerage firm there is a good chance you only have a brokerage account, not an Investment Advisory Account. If you want your investments managed, you need an Investment Advisory Account. When you have a brokerage account, not an Investment Advisory Account, you are responsible for managing your own investments, researching your own investments, and developing your own investment strategy your broker is NOT responsible (although most investors think that s what they do)! 5 of 3

6 11. Most stock brokers and so-called advisors do not manage investment portfolios or your investments, and are not responsible to actively watch, continuously research, or contact you to make timely changes to your investments or portfolio after you purchase those investments. An Independent Fee-Only Registered Investment Advisor under a money manager capacity is responsible for actively managing your portfolio and investments, actively monitoring, continuously researching and making timely changes to your investments or portfolio when necessary within your goals, objectives and risk profile. 12. Accountability is important in investment management. While there are many people in the financial services industry who profess to have the client s best interests at heart, they still may make recommendations that present a conflict of interest. If your Financial Advisor, or prospective Financial Advisor, satisfactorily answered these questions, then that Financial Advisor most likely holds to a Fiduciary Standard and offers Investment Advisory Services. This means he/she is placing your interests ahead of their own. Don t settle for Less than the Fiduciary Standard or an Independent Fee-Only Registered Investment Advisor! 6 of 3