5 Questions You Should Ask Your Financial Advisor

The following article was sponsored by Spanish Peaks Capital

Being a Financial Advisor for over 10 years I’ve seen it all, including many situations that may deceive the client.

After leaving the corporate side of the business and starting my own firm, I realized there are quite a few things that clients may not be aware of.  This is a small list to start with.  If you work with an advisor, make sure that all of these questions have been answered to create a transparent relationship between you two.

1. What are your sales goals?

In all banks the advisors must achieve a minimum commission goal in order to keep their jobs.  Of course, the banks want growth and they should.  All business must be growing. However, when your jobs on the line and commission must be made this can create some ethical dilemmas which may not be in the clients best interest, and only in the interest of the advisor to sell the highest commission product.

This recently happened in 2016 a large bank had to pay hundreds of millions of dollars in fines and fire over five thousand employees for creating phony accounts and moving clients’ money into them just to hit their unrealistic sales goals.

This can be devastating to an investor, and ruin their whole investment plan.

2. What are the exact fees you are charging me?


Most people have no idea what they’re invested in and especially don’t know what they’re paying for them.

How most investment firms work is they charge an upfront fee on a mutual fund usually around 5% then there will be an annual fee anywhere from 1-2%. Imagine knowing you paid 7% in the first year you invest your funds. That year it will be very difficult for you to make any profit.  The fees are sometimes disclosed but usually not. Because as a Broker there is no fiduciary duty on behalf of the financial advisor to do what’s best for the client.

3. Is this investment liquid?

Many types of investments out there require a long holding period. Annuities, some mutual funds, structured products, UITs, illiquid REITs.  This can cause a problem if not disclosed.  To get your money out of these investments there could be up to a 10% penalty. 10% just to access your own funds.  A lot of advisors sell these because they receive huge commissions, up to 8-10%.  There is an incentive to give huge commissions on these products because the client can’t go anywhere. The mutual fund company or annuity company knows they have the clients’ money with them for the long term and that it’s very hard for them to access it.

4. Does management dictate what investments you can sell?


There are a lot of ways which the client is made to feel like there is a free range of product mix but there really isn’t. In banks, there is always a huge push to insurance, such as selling annuity products that have an 8% commission, 5-8 year hold time, and 2% annual fee.  Or life insurance sold as an investment vehicle.  These products are pushed very hard by banks because they have the highest commission.  Most of the time your advisor is selling something that management is making them and not because it is the best for you.

5. What do you invest in?

Ask your advisor what they invest in. I bet it’s not similar to what they have you in. Or in most cases the financial advisor won’t have any money. If you’re working with one that represents a big bank very rarely will he have more money than you.  As most of the commission goes to the bank and not him.  The argument can be made that it should be different based on age and income and this is true. But I am willing to bet he doesn’t have any of his money in loaded actively managed funds or anything with a high commission structure.  In my entire career, I have never had anyone ask me how I personally invest.  Which is odd to me, maybe they are too shy to ask or it may never cross their mind.  I have no problems with it, I love talking about money.

At Spanish Peaks Capital Management, our advisors do not have any sales goals. All advice given is completely independent. Our firm is set up as a fiduciary. By law we have to do what is best for our clients, and we do not charge upfront fees. Our investments are liquid, and we invest in the same types of securities as our clients. We are headquartered in Chicago, and accept clients from across the country. Use our online form or contact me anytime at [email protected].

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71 thoughts on “5 Questions You Should Ask Your Financial Advisor”

    1. Amusingly, I did invest in Kratom when the ban was threatened.
      Now all I have is a few shoeboxes full of pure magic. I tried to bring myself to be upset, but it’s a hard thing.

      1. Have you popped any open after a few months in the closet? I did at Christmas and it had lost all its magic except the kind that makes you not shit for 4 or 5 days. Thought I had it sealed well, but c’est la vie I guess.

        1. It’s pretty well sealed. Put it in caps, put the caps in a few layers of Ziploc.
          Last bag I pulled still contains enough magic, but considering I bought a strain I’d not used before I can’t really tell if it’s depotentiating.

        2. Best of luck with your investment. I feel I should have foreseen the ban being stalled, I’d have much rather stayed buying it fresh & sporadically.

        3. Aye. But I was ready up here.
          I live close to Wyoming, and plenty of folks I know use Kratom to wean off of either Adderall or opioids. Pretty sure a few weeks as the local black market would have at least doubled my financial investment.
          Oh, well. Better luck next time.

    2. Bah. I shot down to the comments section by force of habit and….damned by my time zone.Too late. 🙂

        1. I tried it in a kind of tea…nearly yacked up…then in yoghurt which was a little better.

        2. You have to meditate it in. Or rather, let the Kratom meditate upon your existence allowing you to become more real… more … Kratomical.

  1. This crap is not really that complicated. I used to think so, but after some reading, you can do okay with a handful of mutual funds.
    There may be some exceptional stocks to buy that actually pay a dividend and have some real business people at the company. Too bad you can’t park money in a bank and make 5% relatively risk free.

    1. Mutual funds are for fools. Buy etfs and index funds. Covered calls are win. Read Option to Profit.

  2. if you are not an informed investor, just buy the SP500..none of these funds can beat the market portfolio on a regular basis, after interest fees have been paid.

    1. This is very good advice. Either take the time and put the work in to understand or let the professionals do it. I made close to 13% in 4Q last year. Chances of doing that if I were picking and choosing stocks on my own might actually be less than 0

      1. Even if you “put the work in”, you are pretty much never going to beat the algorithms that investment bankers with ph.d’s in maths, physics, and economics work on all day for the world’s leading banks ..people think they can (an overconfidence bias, as it is called in behavioural finance), but end up depleting their portfolios through excess trading (too many transaction costs), selling “winners” and buying “losers”.

        1. We played an investing game in school where we had fake money and a fake trading service to use.
          Idiot friends shorted the hell out of Apple right before the iPhone (or iTouch – I forget which) was released. Another invested in air travel, but it didn’t pan out.
          My investments in oil were our only winnings. We bought right after shares were dumped following one of those catastrophes, and in the short time of this game we managed to make something like 5% on it.
          That was the day I learned I would need to work hard just to be able to start trading with any reliability. Too much work for an engineer to dedicate, so I use my index funds.

        2. This is solid advice. I’ve only hand selected on stock in my life. I made money on it. But I could have easily lost. Very bright people who are predisposed to being good at this spend a lot of time learning a lot of different fields, get to the absolute apex of their profession and get paid a fortune to do this and only this all day every day. My money will be much better with them investing

        3. A significant part of human intelligence or perhaps more accurately, wisdom, is about recognition of one’s limitations and proceeding from there. Better to be the smart man letting smarter people handle these matters. I don’t mind paying them something as long as they get my money to work for me.

        4. Exactly. Smart enough to let the truly smart ones (in their particular domain) navigate the ship through waters they are more familiar with.

        5. Unless you have had some insider information, chances are that you have taken on excess risk to earn that money.. that is another important point: people’s portfolios are generally heavily underdiversified (that is, a relatively large portfolio variance for a given expected return..if you are interested, look up the CAPM model). Which is why I suggest buying the SP500..not some individual stocks on it, but the index itself.

        1. Holy crap, I just wondered if you could invest in ride-sharing. Of course, I’m not talking about the apps, but if you were to rent out cars to weekend Uber drivers (the ones who troll for a few hours around the bars)…

      2. That 13% is crazy. My parents made an ungodly amount of money in Q4 as well, as did anybody with sizable investments. But we’re all aware, as Lawrence Summers wrote yesterday, that it’s a sugar high. Get while the gettin’s good, because 2017 is going to be shit by Q3. My magic 8 ball told me so lol

        1. I am long term investor. I haven’t had a quarter do worse than 9% in years. There are always ups and downs, smart people seem to manage it well

        2. Smart people are terrified of what the psychopath is going to do to our trade deals and international relationships. Our fiat currency is based upon global perception of our leadership, and now that we’re the laughingstock of the world, expect that to begin its inevitable decline. Then again, all fiat currencies fail, with no exceptions. “Paper money eventually returns to its intrinsic value–zero.” – Voltaire

  3. To a substantial degree, what we think of as investment is straight gambling.
    From that perspective, I lose all distaste for shorting stocks. If you take a careful eye on the history, you can figure out how likely a drop/crash is to occur for a given stock and make purchases accordingly.
    Of course, given the gains to American business already evident under Trump (who, I love to remind people, is not even President yet), it’s highly probable there will be some significant gain. In this case, shorting will suffer against buying in the near term.
    Me, I’m interested in investing in small businesses that have mid-size business potential. Always keeping my eyes open for trustworthy people with good ideas out there.

    1. Could be viewed that way, but you are taking the side of the house. Over time, investments are likely to grow.

  4. “At Spanish Peaks Capital Management, our advisors do not have any sales goals. All advice given is completely independent. ”
    BS. If your team gets a sales bonus for team goals.. its still a sales goal. I don’t know the answer,,,– its rare to push out product without sales goals and bonuses. If I had a car dealership that told me this, I would laugh at them.

  5. I may have some money to be ge,tting back into stock market again. Not that it is a good idea, but that every other idea as bad. However, there are reasonable alternatives to putting all in stock market.
    1)Pay off all debt
    2)Fix everything you can on house. New roof, replace cheap wood-rot windows with Window-World durables, replace old AC units, old plumbing etc.
    4)3 months prepper food stock
    5)rural land
    6)food producing landscaping-nuts/fruits etc.
    7)yourself-education, fitness
    8)Replace old appliances if they are going on the blink.
    10)Silver patterns for wife (silver knives/forks/spoons)
    (But don’t just by new appliances etc if old seems to have life span left.)
    Trump was elected, will pursue pro-growth, it appears, in a way dems claim to do (but quit that. Supporting gay marriage, white privilege is cheaper for them.) This growth policy is good, perhaps, but may be inflationary. So if you need something durABLE/new, now could be a good time.
    I DO plan to get back in the stock market big time now that my wife is working again. But I do not trust paper. Yes, I DO have some gold/silver in country buried in ground, but after a point, you do not want to have too much physical gold/silver. It can also get stolen.
    Women (wives) are skeptical of guns/physical gold etc. And that is not necessarily bad. But after you go a few months increasing stock holdings (if your situation allows), then buy some gold/silver, bury it in a secret place. Get a nice gun safe and buy quality, high value collection guns.
    Just remember, none of the physical assets such as land, gun, gold are very liquid. If you want to get a fair price for them, it will take time.
    For emergencies such as power grid outage etc , about 5ooo cash in home would be good whe credit cards cannot be used. More, is risky. Savings account is also good for quick cash.
    But for retirement, I am not going totally prepper. Stocks, bonds, good financial advice are important. Don’t swallow the prepper creed totally, but don’t dismiss it either.

        1. Yeah try to put a sizable sum in silver or offload it. Silver is for dumbass rookies, Ill stick to krugerands and maple leaves in gold when going judgment proof.

    1. “Trump was elected, will pursue pro-growth, it appears, in a way dems claim to do”
      FYI both Clinton and Obama presided over far greater job creation than did either Bush 41 or Bush 43. So did Carter, LBJ, Truman, and FDR. In fact, the only Republican president who can hold a candle to any Democrat president w/r/t jobs is Ronald Reagan, who was second overall only to Clinton. In general Democrats have spanked Republicans’ asses in job creation.

      1. The Congress writes and passes laws and creates budgets. Congress was GOP for the majority of Clinton and Obama’s terms.
        Ouch….gotta sting…

        1. Basic civics lesson: The executive branch works with Congress to create said budgets. Ever read a paper?
          Dems had the House for Clinton’s first 2 years and Senate for his first 4 years. He had to work with Gingrich after that, which is why his signed legislation generally went rightwards.
          FYI Reagan had to deal with a Democratic House for all 8 years of his presidency and built almost as many jobs as Clinton.
          Either way, presidents deserve credit for job creation. Not all credit, obviously, it’s not a central command economy like the USSR, but definitely for shaping the playing field.

    2. Never hold anything that your wife can discover in a divorce. Land might seem like a good idea, but only if you’re single. Same for home loans, you pay them off and that ‘walking away’ money is gone for good. Liquid assets is what married men need, something you can grab and run.
      If I hadn’t paid off my home loan, I would be sitting in Thailand right now with another $500,000 in my pocket.

      1. Wow, sucks. My wife and I get along pretty well.But I see your point.
        But the only asset I can see that meets your description is gold/silver physical cash. Perhaps that is how peeople used to save. Dig a hole and hide tons of money in the ground. I did a little of that, but seems kind of radical to do it with half a million bucks.
        Still, another thing. With technology as it is, seems reasonaable that they could actually come to create gold/silver aat some point for next to nothing. In which case your gold and silver could have the value of aluminum.
        Nothing is 100 percent in this world.

        1. Cash in a bank account registered at your parents house is fairly safe. As long as you don’t tell her it exists, or leave statements lying around. Never tell your wife where your money is or how much you have. Pensions, investments, savings……. Shhhhhhhhhhh!

        2. I have a divorced Jewish friend who is re-married. Wife has no idea where his money is. He does not tell anybody.

  6. Get some finance books from Goodwill, you can do better on your own with index funds & covered calls.

  7. All asset classes are overvalued.
    The next time the bubble pops there will be blood in the streets.

  8. If “financial advisors” were really whizzes with money, why are they giving you advice instead of getting rich managing their own money?
    Answer: Because they aren’t whizzes with money. But they are whizzes at getting you to pay them fees.
    I call it “ignorance arbitrage.”
    At best a financial advisor will charge you a hefty fee to tell you things you could have learned yourself for free or for the price of a book. At worst they charge a fee to give you bad advice or steer you into investments where they get kickbacks.
    A lot of these “experts” try to make investing sound complicated so you’ll pay them. Investing is not complicated at all. Stay calm. Stay patient. Invest for the long term. Buy some low-fee index funds. If you buy individual stocks focus on what you know. Stay away from anything you don’t understand. Be clear on the tax angles. Don’t get greedy.
    Every man is better off getting financially educated and managing his own money. There’s no excuse today with so much free online information available. Go to sites like http://www.financialsamurai.com/ or https://financialmentor.com/ . Read Warren Buffet’s letters to shareholders http://www.berkshirehathaway.com/letters/letters.html .

    1. I’ve also found it helpful to do my own taxes
      after I learned the hard way that no advisor or accountant cares more about my financial situation than I do.
      Doing my own taxes taught me a LOT about the tax code. I found ways to save money that none of my previous accountants told me (like capital gains harvesting).

      1. FAs are not miracle workers and they don’t manage money, investment managers do that. RIAs are allowed to play with investments and charge you fees.

  9. I know a guy down south who worked in investment banking. He sees a major economic catastrophe coming so he quit his job, got out of the market and put all of his savings and paid in full for his house. He now works as a bartender and is waiting for the apocolypse.

  10. Financial advisers are all crooks, you didn’t even mention the under the table rewards paid direct from the funds to you for turning money their way. Sometimes as high as 20% of the investment from the more crooked funds.

  11. Largest holders of American wealth in in bank CDs and annuities making 2% but banks and insurance make a lot of bets. FAs are not miracle workers and can’t work for free for greedy customers. FSs should not service fools and people expecting premium service with out paying for it.

  12. OR
    Just be your own financial advisor. Why would you rely on others to give you
    advice on money is beyond me. Only YOU have the best interest of YOUR OWN MONEY.

    1. My response as a former financial advisor…
      i. Taxes. You don’t get rich making money, so much as saving taxes. Investments and the concept of returns — interest, dividends, capital gains — are fairly easy to understand. But most people don’t know taxes in depth, or the various ways in which your investments should be configured to save taxes. (Donald Trump knows this for sure…)
      ii. Discipline. A lot of people don’t have the self-discipline to save and invest, even if they know the theory of it. An advisor can function in the same way as a personal trainer, forcing you to do something that you’re too reluctant to do yourself.
      iii. Complexity. If you’re employed or self-employed, your financial situation is usually pretty simple. Once you become a business owner though, you can start to take advantage of some sophisticated strategies that are beyond the knowledge of most people.
      Finally, there is a lot more to a financial plan than just investing/saving. There is also insurance and estate planning which become particularly important as your net worth and/or family situation changes. Most of this stuff is beyond the knowledge level of most people and can get complex. A good advisor will know of this stuff or will partner up with specialists in these fields.

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