One of the most difficult decisions an investor will ever make is who to trust with their investments.  If you’re looking for a new advisor, here are a few thoughts to consider before you make a decision:

What are you looking for?  Many investors would like to invest on their own, but simply don’t know where to start.  Before making any appointments decide what want from your advisor.  Perhaps you only need some advice to start you in the right direction.

How does an advisor get paid?  Brokers go by many different fancy titles, but the reality is they are salesmen; they don’t get paid until they make a sale.  It’s silly to expect objective advice from a salesman who gets paid differently depending on what he can convince you to invest in.  If you have a broker you trust, don’t be afraid to ask the tough questions; it is your money! 

Registered Investment Advisors (RIAs) are generally prohibited from accepting any commissions for their advice.  Instead, they are paid a management fee for accounts under their supervision. This arrangement creates an incentive for the advisor to make sure accounts are performing, and removes the conflict of interest of only getting paid when a sale is made.  The only danger in this arrangement is the potential for laziness or apathy on the part of the advisor.  If you think your advisor isn’t earning his fee, look for someone new.

The best way to care for your investment accounts is to approach the task like running a business.  Conduct your interviews with prospective advisors like a job interview:  What are the candidate’s qualifications?  What is his job history?  What are his salary demands?  How many days off does he expect?  There are costs to running a business and if you can’t control the costs your business will not survive.  And any good employer also knows, if you aren’t willing to pay a fair wage you’re going to have a tough time finding capable help.

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