Questions to Ask
Q: Can they explain how their firm invests in terms that even a 10-year-old can understand?
If not, leave. It means that they themselves don’t understand it well enough to make it of any value to you.
Q: What is their average investment return over 5, 10, 20 years for each risk profile (low, medium, high)?
This is not about “beating an index”. This about the type of average expectation of returns you can expect on your investment over a long period of time based on your tolerance for risk.
Q: How much do they charge for their managed service and what does that involve?
Charging a fee for actually managing your money is not a bad thing. What’s important here is not necessarily the fee, but how much value they can deliver on average (above). By example, we charge 0.6%.
Q: Do they charge for switching funds?
If so, leave. This type of charge can weigh heavily against the performance of your investment, and it may be far more to their benefit than yours to regularly switch funds and charge for doing so.
Q: What other fees or charges are applied to your account and list the cost for each, including any charges for wrapping up or exiting the fund once it’s time to do so?
This way you have the whole picture.