By J.P. Dahdah, Founder & CEO of Vantage
5 questions every investor should ask their team of trusted advisors before hiring them!
If you are like most investors, business owners, and entrepreneurs, you don’t want to learn the hard way that you have outgrown your financial advisor, accountant or attorney.
One of the frustrating realities of being a Self-Directed investor is that it’s hard to find trusted advisors that truly understand how Self-Directed IRAs rules work, which can lead to obtaining advice from professionals that could be misinforming you. In other words, they believe in their heart that they are providing you with the right information, but they aren’t.
Naturally, when we pay a trusted advisor a fee for their expertise in a particular area, we expect and assume that the guidance they are providing is correct. So, the next time you ask yourself “why didn’t my advisor tell me that?” make sure YOU did your homework first before pointing any fingers.
To get started successfully, you must ask the right questions. Here are five “must ask” questions to help you begin the process
For Financial Advisors: “Does your company limit the investment choices within an IRA account to the stock market?” In order to truly diversify a portfolio, an investor should not be limited to traditional investments. Don’t fall for the typical definition of diversification i.e. Small Cap, Large Cap, Growth, Bonds. True diversification may look more like this: Private Placements, Real Estate, Precious Metals, Stocks, Bonds, and most importantly…any of your investment specialties.
For CPAs: “Is there a particular area you specialize in?” It is too difficult to be an “expert” on ALL financial topics. Work with someone that specializes in the area that best fits your retirement planning needs. For example, if you are a real estate investor, hire a CPA that specializes in working with real estate investors. Also be sure they are knowledgeable about retirement accounts and the advanced tax strategies available by investing in alternative assets within IRAs.
For Financial Advisors: “How are you compensated? Are you commission-based or fee-based?” To avoid conflicts of interest or “churning” of fees, work with someone whose compensation is not directly linked to earning compensation through transactional advice. Does your planner have a vested interest in what you purchase? Are his or her decisions based upon what benefits you or what benefits their compensation? Registered Investment Advisors (RIAs), Family Offices and Fee-Based financial advisory firms are typically the most friendly when it comes to holding alternative assets in an IRA.
For Financial Advisors/CPAs/Attorneys: “What do you do to keep up with ongoing changes in the financial industry?” Aside from attending the obligatory continuing education sessions, inquire about any other ways the trusted advisor is proactively staying current within the ever changing financial/tax/legal industry.
For Attorneys: “Are you familiar with alternative investment offerings, real estate investments and various entity structures that are common for the Self-Directed IRA?” Legal professionals should play a major role in the due diligence process of identifying a good investment. They can help read contracts, joint venture agreements, operating agreements and other documents that may be your only protection if an investment performs poorly. Be sure to hire an attorney that specializes in these services and not just a generalist.
It’s your money. It’s within your control. Be sure to select the right trusted advisors for you and your family’s retirement plan.