April 5, 2017 | by James Behr Jr & Christopher Paleologus
Below is a list of questions that everyone should ask their current or potential investment advisor. While this is not a comprehensive list of questions, this can serve as a great starting point.
1. Are you a fiduciary?
Your advisor should always be a fiduciary. They are required by law to act in their client’s best interest. Investment advisors must do their best to make sure investment advice is made using the most accurate and complete information possible. These advisors must disclose any potential conflicts of interest to the client and place the client’s interests ahead of theirs. Furthermore, fiduciaries are required to execute trades at the best prices and lowest costs possible under the current conditions.
Most brokers refuse to act as fiduciaries and instead only promise to abide by a suitability standard. They are not required to act in client’s best interests, they merely are required to find suitable investments. These suitable investments may cost more and are often chosen based on what compensates the broker and/or firm the most. For fiduciaries this would be illegal. For brokers only offering a suitability standard, this is perfectly legal.
Blue Bell Private Wealth Management is an independent fee-only Registered Investment Advisor that acts in a fiduciary capacity for our clients 100% of the time. We have a legal obligation to act in your best interests.
2. How are you compensated?
Advisors vary greatly on how they are compensated. For the most part they can be fee-only, fee-based, or commission based.
– A fee-only advisor is paid solely from their clients and the client does not have to worry about a conflict of interest. These advisors do not receive commissions on any investments that are recommended which means the client’s best interest is always the number one priority. They are usually paid a fee based on the percentage of assets they manage, a flat fee, or by the hour.
– Fee-based advisors can charge a fee for their service as well as collect commissions on investments or products that they suggest or implement. These advisors are able to recommend an investment to a client that is suitable to them but may not necessarily be the client’s BEST option in order to receive more compensation for themselves.
– Commission based advisors are compensated exclusively from commissions on the investments that they recommend for their clients. Potential conflicts of interest can arise with this form of compensation as advisors may recommend investments that give them a larger commission rather than an investment that is the best for their client.
Fee-based and commission based advisors may earn additional compensation based on the investments they choose for you.
Blue Bell Private Wealth Management is a fee-only Registered Investment Advisors. Our income is derived solely from our clients, our loyalty is to our clients not a large bank.
3. What safeguards are there on my account?
First, you should know your advisor/broker’s record as well as the firm’s record. Make sure they are properly licensed and the firm is both registered and compliant with their regulatory authority. You will want to make sure your accounts are protected by the Securities Investor Protection Corporation (SIPC), which protects losses of $500,000 on assets held in brokerage accounts, including $250,000 limit for cash. This does not protect you against the decline in the value of the securities. Also be sure where your assets are held. Are they being held with the firm you are investing with or a custodian, such as Charles Schwab, who acts as an independent third party providing account valuation and safeguards?
Blue Bell Private Wealth Management uses Charles Schwab & Co. as our primary custodian. All assets are held by Schwab and they act as in independent third party providing account valuation and safeguards consistent with any brokerage account. We are also registered with the SEC.
4. How often do you monitor my account?
Do you have a custom account that is monitored often and changing as new information becomes available, or is your account on autopilot? With regards to the later, you could be paying your advisor too much for a simple model allocation that is only looked at once a year. On the other side, you would like to know that if your advisor does look at your account regularly, what are they doing and what is the benefit of doing so? You will want to make sure those answers are in line with your investment goals.
Blue Bell Private Wealth Management monitors their clients’ accounts regularly. All of our accounts are managed individually and changes are made based on relative value and risk management needs. Moreover, the investments that Blue Bell PWM utilizes also serve as a prompt to reevaluate and analyze our clients’ portfolios.
5. What licenses, credentials or other certifications do you have?
The answers to these questions will be important depending on your needs. Your broker or investment advisor should have their required licenses, such as the Series 65, Series 7, or Series 63. Registered Investment Advisors (RIA) are fiduciaries who must have passed their series 65 license are required to register with the SEC depending on how much money they manage. They will be able to manage your investment accounts for you. If all you need is a financial plan, Certified Financial Planners (CFP) will be able to help. If you are looking for tax planning advice a certified public account (CPA) will be the person to talk to. It might also be beneficial to find any other credentials they may have such as publications, awards, or honors.
Blue Bell Private Wealth Management was founded in 2005 by J. Scott Miller, Scott Miller Jr. and Justin Capetola with the vision of providing clients with a better advisor experience. At Blue Bell PWM we have eight FINRA Series 65 Licensed Advisors with over 115 years of combined professional investment experience. We have also been quoted in US News & World Report, The Wall Street Journal, Philadelphia Business Journal and Bloomberg.
What this means for you.
At Blue Bell Private Wealth Managment we are fee-only advisors and act as investment fiduciaries 100% of the time. Our income is derived solely from our clientele and our loyalty is to them not a profit center bank. We are free to choose investments based solely on merit not compensation scheme as a result we recommend investments that some commission and fee based advisors may shun. As fee only advisors our clientele knows exactly what they are paying for our advice there is no hidden compensation or commissions that many investors pay without even realizing it.