9 Questions to Ask Your Financial Manager
Sep 15, 2023
According to the S&P Indices and Active (SPIVA) scorecard, 79 percent of fund managers underperformed the S&P in 2021. Those numbers are the latest in what appears to be a decade of steadily declining performance on the part of finance professionals. Despite these startling statistics, 35 percent of Americans continue to spend their hard-earned money paying for professional services they may not require.
If you find yourself frustrated with the results you’re getting from your financial manager, schedule a time to discuss your portfolio with them.
Once you’ve made that appointment, make a list of your questions for them. If you know you’re unhappy with the results of your current investment but you’re unsure about how to productively talk about this topic, consider the following questions.
How many clients do you currently work with?
How much time would you want your investment expert to spend managing your portfolio on a weekly basis? An hour a week seems completely reasonable, especially given how the market can fluctuate wildly. But if your financial planner or manager has 40 clients, there’s no way you or anyone else is getting an hour per week. That would leave no time to go about the other duties of their job, which vary depending on whether they work for a stock brokerage or own their own business.
The number of clients your money manager has tells you a lot about their workload. An independent financial planner or similar professional has the massive task of managing their small business, along with handling their clients. Investment advisors that work for banks are required to have a certain amount of people paying for their services. At the end of the day, are you just a number to your money manager or are you someone whose long-term success matters to them?
How do you customize each client’s portfolio?
Your finances and goals are unlike those of anyone else. So your portfolio should be unique to you. This is the time to get the details of how your financial manager is creating and maintaining your customized situation.
It’s important to note that many financial planners and managers pick a few funds that they trust and invest their clients’ money in those assets. It’s the financial world’s version of off-the-rack clothing. A custom investment strategy and portfolio for each client would be the equivalent of haute couture.
To customize and manage every client’s portfolio would take a substantial amount of time. And as we saw with the first question, depending how many clients your financial manager or planner has onboard, it’s more likely than not that this person passively manages others’ money by putting everyone in the same stocks and funds.
What are your top five investment recommendations?
This is a strong follow-up to the second question. If your money manager isn’t customizing every client’s portfolio, you want to know the primary investments they make on your behalf.
What percentage of your clients have these stocks/funds in their portfolios?
Is it everyone? If so, then this person isn’t managing your money. They’ve done the bare minimum research and dumped everyone into the same investments, regardless of their goals, income, or timeline. You have to then ask yourself if this person is worth whatever it is you pay them or if you would be better served putting that money towards building your own financial literacy.
That’s one of the reasons financial literacy for everyone is so important. If you have the skills and confidence to invest by yourself, you not only save yourself the money you would spend paying a professional to do this for you but you can also potentially generate higher returns on investment depending on the strategies you utilize.
Do I have these investments in my portfolio?
This is what you ask if your financial planner says that not everyone has their top stocks or funds in their portfolios. But if they’re the top picks for this professional, why wouldn’t everyone have them? And did this person invest in these stocks or funds for you?
So if their top investments aren’t in your portfolio, you need to find out what you have put your money into and why. In fact, if your financial adviser doesn’t have a strategy for any of the stocks, funds, or other investments in your portfolio, then they aren’t doing their job.
How often do you review clients’ accounts or is it only when they get in touch with you?
In the 1987 movie Wall Street, Michael Douglas’ character Gordon Gekko says, “Money never sleeps.” Your portfolio is impacted by the daily fluctuations of the stock market. Opportunities arise and just as quickly disappear. Investing means navigating the turbulent tides of the market. Passively doing so limits your earning potential, exposes you to increased risk, and prevents you from making the most of your money.
Is your financial manager only looking at your account when you call to inquire about its performance? If so, that means you’re paying someone who requires constant oversight to ensure your portfolio is performing as well as possible.
Your financial future is in this person’s hands. How often would you want the person in control of your future to check in on your finances and is the professional you’ve hired meeting those expectations?
How much time do you spend analyzing the markets?
Some people spend their entire careers analyzing the market full-time. Market analysis is a vital part of investing. But if your financial planner has everyone in the same investments, they probably aren’t doing a ton of research about the market.
So what are you paying this person to do? If they’re not customizing your portfolio, or researching investment opportunities, or actively managing your money on a daily basis, how do they spend their day? Is their priority adding new clients so they can collect additional fees to put these people into the same investments as everyone else?
Where do you get your information about the markets and investment opportunities?
When you pay a professional for their services, there are certain expectations. For example, you would expect your financial manager to be an expert about investing. To maintain that expertise, this person should subscribe to industry resources that inform them about the stock market and investment opportunities. They should attend in-person and digital events that continue their education. Your financial advisor should be reading every report they can while listening to other experts and watching the news.
Basically, you want to know how your financial advisor is staying current to ensure your investments make the most sense given the current circumstances. “Money never sleeps” means the person you hire to manage your investments should be a reliable resource for up-to-date information about Wall Street.
For financial managers and planners that own their own businesses: How much time do you allocate to the responsibilities of owning your business?
Plenty of major banks like Charles Schwab and TD Ameritrade offer investment management services. However, if you’re working with an independent financial planner or money manager, you want to find out how much time they’re spending managing their business.
Running your own business is a lot of work. From the administrative and bookkeeping tasks to marketing and sales, entrepreneurship is a time-consuming endeavor. If it’s a one-person business and they have dozens of clients, how can they manage everyone’s portfolios while also handling the work of operating a company?
While working with small, local businesses is great, you shouldn’t be paying someone to sit on your investments instead of actively managing them. That’s a waste of your hard-earned money.
If you’re currently working with a financial planner or money manager, you’re spending an average of $250 per hour for this person’s time. You might have paid a retainer of $4,000 to initially enlist the services of this professional. Take a moment and do some quick math: how much have you spent paying someone to manage your portfolio? And after all the money you’ve paid this person, are you satisfied with their work?
Last year, investment expert and founder of ARK Invest, Cathie Wood, offered this example of how passive funds are losing money for investors.
You’ve probably discovered that your financial manager, money manager, financial planner or advisor has your capital invested in a passive fund. If this is just one example of how a passive fund doesn’t yield results for investors, imagine the profits you’re missing out on by not actively managing your own portfolio.
The current bear market might seem like the wrong time to make any serious moves with your money. But that’s simply not the case. This may be the best time in recent history to learn how to invest in the market and prepare for the eventual turnaround because every bear market is always followed by an enthusiastic bull market.
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