Questions You Should Ask Your Financial Adviser

How do you know if your financial adviser is really top-notch? We find that several people instigate relationships with their financial advisers based on very little solid information. Advisers are famous for appealling to trust. And while trust is a wonderful thing, trust without dilligent research can lead to unexpected outcomes.

You don't have to trust what you understand. And understanding is a lot more involved than looking at glossy brochures full of seniors strolling on the beach.  

In fact, since unlinke Bradley Nuttall most advisers and brokers are paid by the investments they recommend clients should be all the more cautious. The reason is that commissions create a natural conflict of interest. Is the adviser loyal to you or to the product which is their course of income. Likely their loyalty is split. It's easy to spot such conflicts, especially at banks which are famous for selling clients products that just so happened to be owned and managed by the bank itself. When clients see these conflicts they must ensure they know exactly what they are purchasing, the costs, the risks, and the expected returns of the investment. They should ask if their are other investments that can achieve the same objective at lower cost and at lower risk.

We list questions below you should ask your financial adviser. If you aren't satisfied with the answers or if your adviser appeals to jargon rather than easy to understand clear answers, then contact Bradley Nuttall.

INVESTMENT RETURNS & RISK

1. What net returns after all fees has your management of our portfolio delivered?
2. Are these returns consistent with our investment goals and objectives and the expected returns? If not why not?
3. Is the level of risk in the portfolio consistent with our risk tolerance levels and the risk required to achieve our objectives?
4. What and how many changes have you made to our portfolio since we first invested with you?
5. What have these changes to our portfolio cost?
6. Are our portfolio returns reported gross of tax and fees or net?
7. Have any changes been made to the way our investment returns are reported?

FEES & EXPENSES

1. What fees do you charge for the ongoing management of our portfolio?
2. What other fees/costs are we charged such as fund manager fees, trustee fees, admin fees, audit fees etc?
3. What is the total pre-tax cost of delivery for our portfolio including all portfolio monitoring, funds management, portfolio trading and reweighting costs?
4. Please provide the total Management Expense Ratios (MERs) for each of the investments in our portfolio including portfolio trading costs.
5. What performance based fees are received by any of the investment managers?
6. Do you or your firm receive any commission, fund manager fee rebates, or any other inducements from providers?
7. Who benefits directly and indirectly from the fund management fees we pay?
8. Do we or you pay or receive any referral fees for our business?

INVESTMENT PHILOSOPHY

1. What is the investment philosophy applied to the management our funds?
2. Is there a written investment policy statement for the management of our portfolio?
3. Have the investments been managed in accordance with the written investment policy statement?
4. What type of investments do you use to build portfolios?
5. How do you manage fixed interest in terms of credit quality, maturity and maximum exposures?
6. Do you invest in off shore fixed interest?
7. What structures do you use to minimise tax?
8. Is our investment portfolio tailored to our needs?
9. What changes have been made to your investment philosophy since we first invested with you?
10. What changes have been made to our service agreements since we first invested with you?

CONFLICTS OF INTEREST

1. Do you or your firm have any conflicts of interest or potential conflicts of interest that could compromise your advice?
2. Do any other parties who refer to you have any conflicts of interest or potential conflicts of interest that could compromise their decision to refer to you?