The 9 Steps to Financial Freedom (40 page)

That she will send you a monthly statement summarizing all that month’s transactions, including deposits, withdrawals, and current positions held. This statement must come directly from the brokerage firm that’s holding your money, not from your adviser’s office.

That she will prepare both quarterly reports and an annual report that will tell you the exact return she is getting on your money, as well as all fees and commissions. The figure on her report must match the report that is generated directly from
the brokerage firm. These reports should also show you all the realized gains or losses (all the money you actually made or lost from selling an investment) and all the unrealized gains and losses (investments you own but have not yet sold and thus that have not yet realized a profit or loss). These reports should also include returns of the overall index, so you know whether you’re doing better or worse than the index. You want everything in writing.

That she will never ask you to write a check made out to her personally. All the money that is handed over needs to be placed in an institution (Schwab, TD Ameritrade, Vanguard, or the like), and every check is to be payable to the institution. This is absolutely essential. More than one “adviser” has flown the coop with dozens of clients’ money.

That she will return your calls in a timely manner.

That she will always get you the information you request about an investment and find out any answers to questions you have that she doesn’t know.

That she will keep you informed about your money, not just call you when she wants to buy or sell something. If a stock has gone down, or is not performing the way she expected it would, you are to hear about it from her, not read about your money first in the newspapers.

You should type up all these requests on a piece of paper and have your adviser sign an agreement to do all the above.

Just as important as what you ask the adviser is what the adviser asks you. Remember: People first, then money.

I learned, in my practice, that I got a better understanding of my clients when I went over the topics on my questionnaire in
person with them, rather than having them fill out the answers on their own. Sometimes people had a hard time writing things down or tended to leave things out, so talking through the questions enabled me to find out more about my clients than simply reading through hastily filled out answers. Other advisers feel that this is too time-consuming, but this process is not about saving time. It’s about saving—and making—money.

Whether your prospective adviser has you fill out the form or talks you through it, it is absolutely essential that you feel this person wants to get to know you and your money, wants to understand your fears and anxieties about investing, understands how you feel about taking risks, has your best interests at heart. Advisers you interview must spend a lot of time, a couple of hours, getting to know you and your money. They can’t simply plug your answers from a questionnaire into a computer and give you a plan—at least not if it is to work well. What needs to be built is a responsible, respectful, and trusting relationship, and you must not settle for less. Following is the questionnaire I used to go over with my clients, outlining the concerns any prospective adviser you interview must address:

To view the full-size worksheet, or to download the PDF, please visit
http://rhlink.com/nsff001
.