Quizzing Financial Advisors

Today’s busy physician certainly needs the advice and services of reliable, knowledgeable financial planners, but what are the right questions to ask in obtaining those services? How do you know you're getting someone with a good background? Who will do right for you?

Brent Kessel, CFP, co-founder of Abacus Wealth Partners and the author of a new book, It’s Not About the Money: Unlocking Your Money Type To Achieve Spiritual and Financial Abundance, has some tips.

Before physicians narrow the field to people with whom they feel comfortable establishing a relationship, he says to ask about hidden fees and costs of investing. In an ideal world, Kessel says, advisors would provide a full and simple fee disclosure schedule that the physician must sign before any investment is made. Absent that, be sure to ask the following questions of any potential advisor:

1) How much am I paying you and your company directly in management fees, transaction fees (for buying and selling securities), financial planning fees, and retainers?

2) What is the total cost of trading expenses, including spreads between the bid (the price when a security is sold) and ask (the price when a security is bought) as a percentage of my portfolio each year, on securities that I buy directly from you or your firm?

3) How much in up-front or deferred commissions (known as “loads”) or placement fees will I pay on the mutual funds or other investments you are recommending?

4) What is the expense ratio (the amount a fund manager charges a client for their services) or ongoing management fee charge for the fund companies or separate money managers I am invested in?

5) As a percentage of my portfolio each year, what are the costs that you pay for transactions, including bid/ask spreads?

6) Do you earn any other fees or commissions I haven’t asked about? What is the source of those? In what way do they come out of my portfolio’s returns? If there are in addition to the charges discussed above, what percentage of my assets do they represent?

For a doctor seeking an ongoing relationship with a competent fee-only planner, Kessel also recommends contacting the National Association of Personal Financial Advisors. All NAPFA planners must provide comprehensive financial planning, have taken a fiduciary oath to treat their clients' money as they would their own, and are subject to twice the continuing education requirements of most CFP professionals.