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5 steps to assess your advisor

5 key steps to assess how well your advisor is managing your investments.​​​​​​​

1. Understand your total return over time

Your total return includes capital gains plus all interest and dividends. It does not include investment costs or any taxes you may pay.

In most cases, you won’t find your total return on your account statements. But your advisor should be able to get this information for you, going back to the beginning of your relationship with their firm.

Keep in mind that short-term returns are less meaningful than long-term ones. Try to find out your total return for the longest period that you can. Measuring average returns over at least 5 years will give you a good idea of how well your advisor is managing your assets, but even 2 or 3 years of data can be useful.

2. Calculate your total costs for each year

Your investment costs reduce what you make investing. It’s important to know your costs, so you can assess whether you are getting value for your money.

Get a full accounting of all costs including:

3. Compare your results to appropriate benchmarks

Your total return, minus your total costs, shows how well you’ve done investing. The next step is to compare your results to how the markets did, using benchmarks. Look for a benchmark that has a similar asset mix and risk as your investment portfolio. Your advisor can help you understand which benchmarks most closely match your portfolio.

Keep in mind that benchmark results do not factor in investment costs. But even after costs, your returns should at least come close to the benchmark. The pattern of change each year should also be similar. In other words, if the benchmark is up, your results should be up, too.

4. Assess the total value that your advisor provides

How well your investments are performing toward achieving your goals can give you an idea of the value you’re getting from your advisor. Also consider the other services your advisor provides, such as:

  • helping you map out your investment strategy based on your financial goals, tolerance for risk and time to invest,
  • giving you access to research and information you may not easily find on your own,
  • saving you time by analyzing suitable investments,
  • regularly monitoring your investment portfolio and rebalancing it when needed,
  • providing advice about insurance, tax planning and estate planning, and
  • keeping track of necessary paperwork and documents.

5. Assess whether you’re happy with your results over time

If you’re not happy with your returns, or your investments aren’t helping you reach your goals, address your concerns with your advisor. You should also talk to your advisor as your financial needs and goals change. Ask if there are ways to reduce your costs or change your investment strategy to improve your results. The conversation should be about your portfolio and improvements your advisor can make now.

If your advisor seems unwilling to help, you may consider changing your advisor. This is a big decision, and you may have to pay transfer fees to move your account to another firm. There may also be costs and tax consequences if your new advisor recommends changes to your portfolio. Discuss any potential changes to your portfolio with the new advisor before you decide to switch.


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