10 Questions to Ask

This is a crucial question to ask a financial advisor. In fact, if your Financial Professional is not a Fiduciary, he/she can not use the title “Advisor”. Fiduciaries must put their clients’ best interests before their own. Because of this obligation, financial advisors who are bound by a fiduciary duty tend to have fewer conflicts of interest and thus be more trustworthy. Financial professionals who aren’t bound by fiduciary duty are simply required to uphold a suitability obligation, which means that while they must make suitable recommendations to their clients they aren’t required to put their clients’ best interests before their own. When we act as your investment advisor we are bound by a Fiduciary Duty to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts. You should understand and ask us about these conflicts because they can affect the investment advice we provide you.

Here is an example to help you understand what this means: We have an economic incentive to encourage you to invest money through us, since this increases our compensation (because we are paid in part based on the assets we manage). While we don't believe this is a material conflict, you should still be aware of it.

A financial adviser’s certifications can be a good indicator of his or her level of experience and expertise. Two of the most notable designations are the certified financial planner (CFP) and chartered financial consultant (ChFC). Both require an adviser to have a certain level of experience, complete coursework, submit to a background check and abide by a set of ethical standards.

Our advisors hold many different designations. You should ask your Pathworks Advisor what designations they maintain.

A Certified Financial Planner (CFP®) has competence and experience in all areas of financial planning. Individuals who become certified must complete the following ongoing education and ethics requirements to maintain the right to continue to use the CFP® marks:

• Continuing Education – Complete 30 hours of continuing education hours every two years, including two hours on the Code of Ethics and other parts of the Standards of Professional Conduct, to maintain competence and keep up with developments in the financial planning field; and
• Ethics – Renew an agreement to be bound by the Standards of Professional Conduct. The Standards prominently require that CFP® professionals provide financial planning services at a fiduciary standard of care.

A Chartered Life Underwriter (CLU) is a professional designation for individuals who wish to specialize in life insurance and estate planning. Holders of the Certified Financial Planners designation will often add CLU to their credentials to demonstrate additional subject-matter expertise. Individuals must pass a series of courses and examinations administered by the American College of Financial Services to receive the designation.

Advisers should be able to tell you whether they or their firm have faced any past regulatory, criminal or disciplinary actions. It’s important to know whether an adviser or their firm has previously violated rules or misled consumers. A number of similar complaints filed against an adviser or firm’s track record may raise a red flag.

You can also find information on a firm’s disclosures in its Form ADV (SEC-filed paperwork). You can find this paperwork online through the SEC’s Investment Adviser Search tool, or you can request the paperwork from an SEC branch. Details about a firm’s disclosures are listed under Item 11 of Part A. More in-depth descriptions of the disciplinary events are provided in Part B, Item 9.

No, none our advisers or our firm, have had any past regulatory, criminal or disciplinary actions. Also, none of us have filed for Bankruptcy.

Before choosing a financial adviser, it’s important to consider whether you simply want investment management or if you want more comprehensive financial planning and wealth management services. Financial advisers often offer a wide range of services in addition to portfolio management.

We are a Registered Investment Adviser that offers investment advisery services to retail investors. Our advisery services include Asset Management, Financial Planning, Retirement Planning & Estate Planning.

If you open an advisery account with our firm, we’ll meet with you to understand your current financial situation, existing resources, goals, and risk tolerance. Based on what we learn, we’ll recommend a portfolio of investments that is monitored, and rebalanced to meet your changing needs, stated goals and objectives. We meet with you on a regular basis to discuss your portfolio and other related planning issues.

We do not restrict our advice to limited types of products or investments and our firm does not impose requirements for opening and maintaining accounts or otherwise engage with us.

It’s also helpful to ask whether an adviser specializes in working with any one type of client. Some financial advisers work exclusively with wealthy individuals and their families. Others may work specifically with business owners or people in a certain professional field, such as doctors or university employees. Choosing an adviser who works with clients whose situations are similar to yours means they’ll be better equipped to offer the type of guidance and advice you need.

Our advisers work in teams and manage the wealth of over 225 families throughout the United States. We have years of experience working with multi-generational families, business owners, 401k plans and trusts.

Financial advisers typically require clients to invest a certain level of assets in order to open or maintain an account. For instance, many financial advisers only work with clients who have at least $250,000 in investable assets, while others set their minimum as high as $10 million. This figure is a good indication of the types of clients an adviser typically works with and whether you can afford the adviser’s services.

We don’t have a minimum level of assets to open or maintain an account. We believe that everyone needs to start somewhere; so we are happy to help in any way we can.

We manage the investments for about 225 families with assets that total over 110 million dollars. We handle accounts as small as $500 even though our average client size is about $450,000.

You need to know how much your financial adviser will charge for their services. Depending on the service, an adviser may charge a flat fee, an hourly fee or an asset-based fee. Typically, advisers charge a flat fee or hourly fee for financial planning services and an asset-based fee for portfolio management. Some advisers also earn commissions for selling financial products or trading securities.

We are a fee only financial planner/adviser so our fees are asset based. We charge a management fee based on the average balance of your account. The fee is withdrawn from your account on a quarterly basis after the end of each quarter. We also provide our clients with financial, retirement and estate planning services. These additional services are provided as part of the management of our clients’ accounts and are included as part of our quarterly management fee.

The fee an adviser charges for their services may not include all costs. Advisers may charge additional fees for services that are more complex or that they consider to be extra. For example, an adviser may create a financial plan for you, but then charge extra for implementing that plan.

You might also be responsible for trading and brokerage costs, as well as fund fees. These additional costs can add up, so be sure you’re aware of all of the fees you’ll be responsible for paying before deciding to work with an adviser.

If we manage your investments, the only fee we charge you is your quarterly management fee. (see Question 7). Although the management of your investment portfolios generate trading and brokerage costs, we pay these fees and do not pass them on to you.

However, the investment portfolios that we create for you have internal fees that are built into the investments that we use. These expenses are called the Expense Ratio and they measure how much the investment charges for administrative and other operating expenses. The average expense ratio for our portfolios range from 0.06% to 0.18%.

You should also ask advisers to describe their investing approach. Some advisers customize portfolios according to clients’ needs, while others offer a selection of model portfolios that they assign to clients based on their needs. Advisers often offer a range of risk levels and asset allocations. However, some advisers may prefer asset preservation over aggressive growth. If you’re not comfortable taking on a lot of risk, you’ll want a financial adviser who advocates a more conservative strategy. Knowing whether or not their investment style aligns with your personal investing philosophy beforehand can save you a lot of headaches in the long run.

Advisers’ investing approaches may be driven by different philosophies, such as value investing, which seeks relatively undervalued stocks with the hope they’ll eventually produce strong returns, or contrarian investing, which espouses investing in opposition to the market majority. If investing for the greater social good is important to you then you may want to seek out an adviser who offers socially responsible investing.

Other key questions to ask about an adviser’s investment approach are how they measure success and what the tax implications of their investment strategy are. Advisers should ideally be measuring progress against your defined financial goals within your timeline and risk tolerance rather than trying to beat the market. It’s also important to ask an adviser whether they’re explicitly taking taxes into account when they’re investing your assets as this could significantly impact your net returns.

Our investment philosophy is based on the following basic principles:

• Develop highly diversified portfolios that feature a broad range of asset classes and market sectors;
• Use market-based investments, not manager-based investments;
• Hold the investments for long periods of time;
• Periodically reallocate investments as conditions warrant;
• Strategically rebalance as needed.

Our investment portfolios are highly diversified and invest primarily in mutual funds and exchange traded funds (ETFs). We use as many as nineteen asset classes and market sectors to create portfolios based on your risk tolerance. This approach is very effective, but of course cannot ensure investment success or prevent loss in a declining market.

This question can give you a glimpse into a typical client experience with an adviser. By finding out how often an adviser is in touch with his or her clients, you can get a sense of whether there will be an open line of communication or simply quarterly updates. Some advisers may prefer frequent face-to-face meetings, while others may primarily work over the phone or via email. Some may be open to phone calls whenever a question arises, while others may prefer to stick to scheduled communications.

How we communicate with our clients is driven by our clients’ needs and the complexity of their financial process. We can meet with you in person, by zoom, by email or just over the phone.

Usually, during the first year of our engagement, we will meet at least 2-3 times to make sure that we understand your risk tolerance and financial needs, and to explain how to read our quarterly investment reports (which are mailed out to all of our clients) and how to log into our Client Web Portal.

We are always happy to talk with our clients whenever the need arises.