How to Select an Advisor

Selecting a financial advisor is a very important decision.  Every client has a unique situation and needs, but there are some good basic questions that you should consider when talking to potential advisors.  We have provided our answers to these questions here, and we encourage you to talk more with us about these questions, or any others you may have.

COMPENSATION AND CONFLICTS

Will you manage my assets using the fiduciary or suitability standard? Homrich Berg operates under the fiduciary standard, meaning that we must put your interests first, period.

Homrich Berg operates under the fiduciary standard, meaning that we must put your interests first, period.  Many brokers only operate under the suitability standard, meaning that they can recommend an investment and accept financial incentives for that investment from the manager as long as the recommendation they are making is “suitable” for you (not necessarily in your best interest, but suitable). This is a huge distinction that many people do not realize, and we believe this is one key reason many longtime clients of brokerage firms and banks consider moving to a fiduciary independent advisor.

Are you ''fee only'' or just ''fee based''? What about commissions or other payments? Homrich Berg is fee only, not fee based. We are only paid by our clients.

Homrich Berg is fee only, not fee based.  We are only paid by our clients.  Most clients pay a fee calculated as a percentage of the assets we manage.  Some firms charge fees in a similar way…but then also collect commissions, mutual fund fees, incentive fees, or other side payments from other business services, leading them to call themselves “fee-based.”  Some brokerage firms will try to tell you that their service “is not as expensive as those independent firms where you have to pay a fee” but they do not tell you that can often end up paying even more in commissions and mutual fund fees and hidden incentive payments – but you may not see that number anywhere on your monthly statements.

Does your firm sell products or services besides wealth management? Some firms sell insurance, mortgages, accounting services, estate planning legal services, and/or investment banking services.

Some firms sell insurance, mortgages, accounting services, estate planning legal services, and/or investment banking services.  Homrich Berg does none of the above. We believe this makes it easier for us to be your unbiased advisor across all parts of your financial life.

BASIC FIRM INFORMATION

Does your firm offer investment management AND financial planning expertise? Some firms focus mostly on planning as their true focus area, while other firms are mostly asset managers focused on investments but not really helping their clients with their entire financial life.

Some firms focus mostly on planning as their true focus area, while other firms are mostly asset managers focused on investments but not really helping their clients with their entire financial life.  Homrich Berg believes in the importance of combining both into one complete level of service for our clients, and invests in building our expertise in both areas.

What credentials do your people have? In our view the two most critical certifications are the CERTIFIED FINANCIAL PLANNER TM certification and Chartered Financial Analyst® certification.

In our view the two most critical certifications are the CERTIFIED FINANCIAL PLANNER certification and Chartered Financial Analyst® certification.  CFP certificants have completed university level financial planning courses and have passed a lengthy exam covering over 80 planning-related topics.  You can learn more at www.cfp.net.  CFA charterholders must pass three separate full day exams focused on a wide range of investment related topics, each of which demands a minimum of 250 hours of study per the CFA Institute.  Learn more at www.cfainstitute.org.  We also have many Certified Public Accountants (CPAs) on our staff  who bring the rigor and focus of their background to their client work.

Do you provide a disclosure annually to the SEC? Registered Investment Advisors (RIAs) like Homrich Berg must file a Form ADV with the SEC each year.

Registered Investment Advisors (RIAs) like Homrich Berg must file a Form ADV with the SEC each year.  You can search for the ADV of an advisor at www.adviserinfo.sec.gov.  Form ADV Part 1 online describes the firm’s services, how many financial assets they manage, their compensation, disciplinary history, and other operations details.  Form ADV Part 2 is what the advisor is required to give you as a prospect (we include one in every set of brochure materials for a potential new client meeting).  Part 2 provides more information about the services, investment strategies, fees, and potential conflicts for the firm.

How long has your firm existed? Are you going to be there for me and my family in the future? Homrich Berg has been helping clients for 25+ years and has a strong succession plan in place with a large staff that ensures continuity over time for your family.

Homrich Berg has been helping clients for 25+ years and has a strong succession plan in place with a large staff that ensures continuity over time for your family.  Some firms have only been around a few years, or have teams of people who have jumped around from firm to firm over time.  We believe our long-term financial strength and growth through many ups and downs of the financial markets should give you comfort in our ability to work with your family for many years to come.

Who owns your firm? HB is owned by its principals. We feel this independence allows us to focus on you as clients with our long-term strategy and investments.

HB is owned by its principals. We feel this independence allows us to focus on you as clients with our long-term strategy and investments.

INVESTMENTS APPROACH

What is your approach to investing? This is a lengthy discussion, and we have a brochure solely focused on this topic.

This is a lengthy discussion, and we have a brochure solely focused on this topic.  Key areas you should discuss with your potential advisor should include their thoughts on diversification, asset allocation, manager selection, active vs. passive strategies, manager monitoring, rebalancing, and risk management.  Who is making the investment decisions and how often do they meet?  How do they define investment success?  How do they handle the ups and downs of financial markets?  How do they judge whether they are successful or not?  Do they focus on tax implications and estate implications when building your plan?  This is a good topic to spend some time reviewing in detail with your potential advisor.

Does your firm have a dedicated investments staff? Many firms have their principals also doing the investment strategy.

Many firms have their principals also doing the investment strategy.  At HB we have a dedicated investment staff focused solely on investments research every day, not on serving clients.  But we mix in the client perspective and the experience of our partners by having both groups on our Investment Committee that makes our investment decisions.

Do you use a third party custodian? This is a critical question that should always be asked. Most independent firms like Homrich Berg will use a third party custodian like Charles Schwab or Fidelity.

This is a critical question that should always be asked.  Most independent firms like Homrich Berg will use a third party custodian like Charles Schwab or Fidelity.  This provides you as the client an independent way to verify your assets outside of reports from your advisor.

THE CLIENT RELATIONSHIP

Can you show me a consolidated performance report for all my investments? Some firms will send you monthly or quarterly account balance information, but not true total return performance data.

Some firms will send you monthly or quarterly account balance information, but not true total return performance data.  Other firms may give you an overall portfolio view, but no details on how individual managers or funds are performing vs. benchmarks or what is driving your overall performance.  HB gives you online access to your entire portfolio at any time with updated values net of fees and expenses.

Who will work with me? How big will my client service team be? At HB you will typically have 3-4 people on your client service team, and the culture of our firm is for the entire firm to serve you as a client.

At HB you will typically have 3-4 people on your client service team, and the culture of our firm is for the entire firm to serve you as a client.  Some firms with sales oriented cultures do not really share ideas between teams and may be financially motivated not to get more people involved in serving you as a client.  That is not our approach – we believe in a team approach.

Will I feel comfortable with your team? Personal fit is important to us and we try to align our new clients with the best potential fit for their personality and needs among our HB team members.

Personal fit is important to us and we try to align our new clients with the best potential fit for their personality and needs among our HB team members.  We feel our 98% retention rate speaks to the success of our focus on service and fit.

Will you work well with my other advisors? As an independent firm not offering other services, we are comfortable working with your existing attorneys, accountants, insurance advisors, and other key members of your overall advisory team.

As an independent firm not offering other services, we are comfortable working with your existing attorneys, accountants, insurance advisors, and other key members of your overall advisory team.  When appropriate we can help you find a new advisor if you are not pleased with their service, but we have no financial incentive to steer you to a particular firm or individual.  We serve as the leader of your financial team and work to keep everyone informed to help achieve your goals.

Can your firm grow with me over time? Some firms specialize only in small clients or large clients.

Some firms specialize only in small clients or large clients.  HB serves clients from under $500,000 in assets to over $100 million.  We have the ability to handle the complexity of your financial life no matter where you end up on that spectrum.

LEARNING MORE

We have included links in many of the Q&A items in this section but will repeat those and add a few more here that could be helpful resources for you as you search for a quality advisor.

NAPFA
FPA
Independent Advisor Learning Center 
CFA Institute

 

Interesting in learning more? Click here to contact us.