Nancy Graham CPA, CA, CIM, CFP, TEP

Portfolio Manager
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  • 1.800.230.5544
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Is Your Advisor a Little Too Close for Comfort?

June 22, 2017 - 0 comments

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In my last post, You, Your Retirement, and Your Best Friend, I introduced a conflict you can bring to your own best interests if you hire a friend or family member as your financial advisor. It just doesn’t seem worth exposing either of you (or your entire family) to the problems that can arise when the dual roles clash.

That said, many of my clients are good friends. As our relationship unfolds, we often end up enjoying one another’s company. So how do you know if you’ve crossed a line? Here’s a test for you to use: Are you comfortable asking your advisor the following two questions? Is your advisor, in turn, comfortable providing clear and candid answers to the same?

  1. What am I paying (including fund manager and fund management costs)? Thanks to the new annual CRM2 disclosures, fund manager fees are now more transparent. But they can still require some math, plus the costs of the underlying investments are still reported separately, often in the fine print. Your advisor should be willing to help you sort it out.
  2. How are my investments performing (compared to my financial goals and appropriate market benchmarks)? Is your advisor helping you understand and accurately assess your financial progress? You may be enjoying the personal relationship, but are you sacrificing returns you should be earning, given your goals and risk tolerances?

If you’re uncomfortable asking these two basic questions – or your advisor is dismissive when answering them – watch out. You may be either too close or too far apart for comfort. Think of it this way: Is the friendship worth postponing your retirement over?

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