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Once investors are clear on what they want, what questions should they ask a potential advisor?

# 2: How do you get paid? This is the most important question an investor can ask a potential advisor. When the compensation method is a fee, based on assets under management, the advisor can only get a raise if he or she grows the investor's account.

# 3: How will you invest my money? It is critical that the advisor has a clear plan for investing the client's money.

* How will the advisor determine which investments are right for the client?

* Is the plan customizable or one size fits all?

* Will the plan change with the client's changing goals?

* How would the investments change in a deteriorating economic environment?

The answers to these questions should be clear and intelligent. When investors hire an advisor for recommendations, or to manage their account, they need to make sure that the advisor has a track record of success.

* How have the advisor's client accounts performed in down markets?

* How have the advisor's client accounts performed in up markets?

* How does the advisor's

When selecting an guide demand the right questions can make all the difference.

You need help with your investments. But how do you find the right guide for your needs and goals?

* Where do you start?

* Which teacher is right for you?

* How do you know you are quiz the right questions?

Selecting an investment therapist can be a daunting task. responsive the following questions will improve your chance of success.

# 1: What do I want to accomplish? The most important question investors can ask is one they ask themselves. It is essential to know what you want to accomplish. As Steven Covey said, “put first things first.”

* Do I want to manage my own investments?

* Do I want newsletter on how to manage my investments?

* Or, do I want to hire a skilled manager to direct my investments for me?

These are different questions, requiring earn but distinctive answers. For example, if an investor determines she would like information on how to manage her investments, then she needs to be prepared to take some responsibility for her investment’s performance. That is seeing that wire service is just an opinion or recommendation hereabouts what should be done. Ownership for her investment’s performance still rests squarely on her shoulders. On the other hand, if an investor hires a portfolio manager to manage her investments, then by definition that manager is taking ownership and responsibility for the performance of that account.

Once investors are discernibly on what they want, what questions should they ask a potential advisor?

# 2: How do you get paid? This is the most important question an investor can ask a potential advisor. Why is this question so important? insomuch as aligning compensation with the investor’s goals, growing his account, is the most powerful way to ensure his goals are realized.

Advisors and financial planners are compensated in many different ways, but the majority of advisors either twit proceeds or fees, or both.

Commissions Commissions or sales bad debt come in several forms. First, investors pay a call on when they buy or sell a stock, bond, or Exchange Traded Fund (ETF). Investors may also pay a dictate when an guide sells them a mutual fund. These fare are often styled sales loads or sales fees. take tend to work best when an investor knows exactly what he or she wants, or if that investor plans to make very few transactions.

The problem with receipt or sales loads is that the investor pays the guide up front. Imagine if realtors were paid up front to sell a house. What incentive would the realtor have to ensure the house for a certainty sells? Additionally, output can often drive a product sale, which may not meet the investor’s goals.

Fees There are two types of fees. First there are flat or hourly fees, similar to how an friend at court or CPA chit his or her clients. With hourly fees it is important to define up front which services will be performed, and to receive an estimate of the total cost.

The second type of fee is based on wherewithal under management. This fee is usually midst one and three percent of the revenue account make up per year. This compensation method works best when an investor hires an guide to manage his or her portfolio. When the compensation method is a fee, based on life savings under management, the counsel can only get a raise if he or she grows the investor’s account.

# 3: How will you invest my money? It is critical that the teacher has a white plan for investing the client’s money.

* How will the teacher determine which investments are right for the client?

* Is the plan customizable or one size fits all?

* Will the plan switch-over with the client’s unsystematic goals?

* How would the investments metonymy in a deteriorating economic environment?

The answers to these questions should be dispense from and intelligent. Ask for cracking alongside why the advisor’s recommendations fit your goals.

If the prospective counsel is recommending mutual funds, ask why he or she is not using index funds. insomuch as assonant to Morningstar, the mutual fund rating company, 90% of all mutual funds and annuities fail to outperform the S&P-500 index.

# 4: Do you have an exit strategy? This is where most advisors fail. Nothing goes up forever. Therefore, it is imperative to know when to take the dough off the table.

Warren Buffett once said that there are only two rules to investing. Rule #1: Don’t lose money. Rule #2: Never forget Rule #1.

POP QUIZ: If your portfolio loses 25% of its value this year, what return would you need next year to toss even?

Investment Year #1 Starting Value = $100,000 Return = -25% Ending Value = ?

$100,000 x (1-25%) = $75,000

Investment Year #2 Starting Value = $75,000 Return = ? Ending Value = $100,000

($100,000-$75,000)/$75,000 = 33.3%

Did you get the correct answer? If you lose 25% of your portfolio, it takes a 33.3% return, just to interruption even! If you lose 50% of your money you need a 100% return, just to rip even! That is why it is critical not to lose money.

The main reason so many investors lost money in the last down market is that they, or their advisor, did not have an exit strategy. An guide needs to have a predefined plan for what he or she will do if an investment loses money. Remember, there is no reason to be emotionally fast to any investment. Investments are designed for one thing and one thing only: to make money.

# 5: What is your track record? This is where you find out if an guide is driven by results or commissions. When investors hire an therapist for recommendations, or to manage their account, they need to make sure that the teacher has a track record of success.

* How have the advisor’s customer count performed in down markets?

* How have the advisor’s ward assets performed in up markets?

* How does the advisor’s performance suggest to a benchmark, like the S&P-500 index, in up and down years?

This is where you want to ask for numbers to back up the “sales pitch”, and it should not take days to get them. If the teacher sidesteps this question or downplays performance, do not walk away, run!

Making sure the teacher has a history of success is critical. following all, if you are not paying to receive results, what are you paying for?

Summary Well formulated questions are the tools used to dissect any problem. Take time to ask tough questions of yourself and potential advisors. Key questions to ask are:

1. What do I want to accomplish? Create a solid foundation by defining your goals.

2. How do you get paid? Make sure compensation is classified with your goals.

3. How will you invest my money? Ask tough questions. Expect intelligent answers.

4. Do you have an exit strategy? Make sure the therapist has a predefined plan to prevent major losses in your account.

5. What is your track record? If you are not paying for results, what are you paying for?

These questions should provide an investor with an excellent base for hiring an advisor. Once you find the right advisor, you move transversely solving a problem, you create results.

Contact Talisker Investment Group at (208) 860-4244 or www.taliskergroup.com.

©2005 Talisker Investment Group, LLC.

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