Philosophy of the Fund Advisor
Before choosing your mutual fund advisor, it's important that you understand the various advisors' philosophies. These philosophies include investment viewpoints, client service attitude and financial planning values.
Investment Viewpoints: It's important that you have a thorough understanding of the way your money will be invested. Does the mutual fund advisor believe in active or passive strategies? Does the advisor believe in tactical asset allocation, strategic asset allocation or a combination of the two? Will your portfolio of mutual funds be diversified or concentrated? While many different strategies may be successful, you want to be confident that the advisor can explain their viewpoints and can demonstrate that they have successfully implemented their philosophy.
Client Service: How often will you be contacted by the advisor, will the advisor meet with you in person, and can the mutual fund advisor demonstrate a successful track record of retaining clients? Some investors prefer to be hands off during the investment process while others prefer to have more communication. Some investors prefer a sounding board versus turning over their portfolio to an advisor. Decide where you fit on the spectrum and then hire a mutual fund advisor accordingly.
Financial Planning Values: Would you like an advisor to help you develop and prioritize your goals and/or manage your financial affairs? Maybe you prefer an advisor that will only manage your mutual fund portfolio? When you're interviewing various mutual fund advisors, it's important that each advisor is able to communicate the value of their financial planning services, if they charge a separate fee for the services and if you have a choice whether or not to engage the advisor's planning services.
How Do You Pay the Fund Advisor?
Fees charged by a mutual fund advisor will tell you a lot about the advisor. Are they selling products or advising on investments?
Many financial advisors use no-load funds or load-waived Class A share funds within a program that charges a flat annual fee based on the size of the account. These fees vary from advisor to advisor and depend on the level of assets the investor commits to the program (these fees may range from .50% to 1.5% per year). For example, an account with $100,000 charged an annual fee of 1% would pay $1,000 per year.
Other advisors may charge a sales load upfront or a contingent deferred sales charge if the fund is sold prior to a specified period.
Resources to Help Find a Fund Advisor
A couple of sites that will help you identify mutual fund advisors: