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10 Questions to Ask a Financial Advisor

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

couple meeting with financial planner

If you’re considering hiring a financial advisor, you’re ahead of the game — almost half (45%) of adults ages 40 to 59 would rather make an appointment with a dentist than with a financial planner, according to a survey from AARP.

But getting your financial ducks in a row is a good idea. According to one study, perceived financial well-being — feeling that you’re on the right track and secure in the direction you’re headed — is a key predictor of overall well-being. And consulting with a financial professional can help you get there.

10 questions to ask a financial advisor

A financial advisor is a professional who can work with you to manage your investments or advise you on your financial life in general, from retirement savings and college funding to life insurance and estate planning. Choosing the right financial planner for you will depend on your particular needs and your planner’s individual style, so it’s important that you ask questions before you settle on a pro.

Here are some suggestions of what to ask a financial advisor.

1. Are you a fiduciary?

Being a fiduciary means a financial planner always must put the best interests of their client above their own. That means acting prudently and avoiding conflicts of interest, among other things. When someone is a fiduciary, they’ve essentially agreed to offer you their best advice.

“I think that’s important,” said Howard Pressman, a financial planner in Vienna, Virgina. “A fiduciary is sort of at the very top of what’s owed to the client.”

2. What licenses or certifications do you have?

There are a variety of ways a financial planner can be trained, and it’s important that you understand what training yours has received. You might find, for instance:

  • CFA: chartered financial analyst (from the CFA Institute)
  • PFS: personal financial specialist (from the American Institute of Certified Public Accountants)
  • CFP: certified financial planner (from the CFP Board)

Many experts recommend finding a CFP, a designation that requires thousands of hours in education, testing and field experience to acquire.

“I think the CFP designation, for financial planning, is kind of the pinnacle of what you’re looking for with someone,” Pressman said. You can verify someone’s designation by checking with the issuing organization.

3. What services do you offer?

Some financial planners offer planning services, which means looking at your whole financial picture — assets, liabilities, insurance expenses and employee benefits, for instance — and helping you make a plan. Others offer investment management only, which means managing your investment portfolio without looking at the rest of your life.

“Certainly investment advice is part of a good financial plan, but we also need to be discussing risk management, things like life insurance, retirement income planning or retirement savings, saving for goals, estate planning, often tax planning,” Pressman said. “Things like that all need to be factored into what a financial plan is.”

4. How will you be paid?

Some advisors charge by the hour, while others charge a percentage of your investment portfolio each year or a fixed fee based on your portfolio’s value. Some planners also charge a flat fee for certain services, such as an annual checkup or portfolio overview. Some (nonfiduciary) planners receive commissions for recommending certain products.

“There are many different models by which financial planners charge their clients, and I don’t necessarily think any one is better than the other,” Pressman said. “But moreover, does the consumer understand how this person is being compensated and all the ways this person is being compensated?”

The average fee for those charging a percentage of assets under management is 1.02% for a $1 million account, according to a 2017 AdvisoryHQ study. The number gets slightly higher for smaller accounts (1.12% for a $100,000 account, for instance) and slightly lower for larger accounts. The average fee for those charging by the hour is typically $120 to $300 per hour, depending on where you live.

5. What is your typical client like?

Some advisors specialize in certain groups, such as people with portfolios worth at least $200,000 or people nearing retirement. You may be better off working with someone who understands the stage of life you’re in, so make sure your planner works with clients like you. If a planner tells you they typically work with clients who have six-figure assets and you’re 25 and just starting out, you may want to search for someone who’s more familiar with the issues you’re facing.

6. Why did your last client leave you?

The relationship between a planner and client should be a personal one, but it doesn’t always work out. It’s useful to hear why someone may have left the advisor’s services — and to know that your advisor is authentic enough to tell you about it.

“I had one client who decided to leave me because he felt that I was too conservative,” said Marguerita Cheng, a financial planner in Gaithersburg, Maryland. “I feel that if you are too aggressive with clients’ money early on and they lose money, it’s very hard to rebuild trust.”

In general, asking advisors this question will help you get a feel for their honesty and forthrightness. If a planner goes on the defensive or seems like they’re not being square with you, you may want to move along.

7. What’s your investing philosophy?

Each financial advisor has their own preferred style of investing, and you should make sure it fits yours. Cheng, for instance, doesn’t accept money for investment management unless she also can do planning for the client. And while she participates in both passive and active investing, she doesn’t do a lot of stock picking. “I don’t think I can do a good job for you managing your money if I don’t understand your goals,” Cheng said. “You’ve got to make sure that’s what you want.”

If your planner likes value investing — searching for equities they think are underpriced — and you’re a fan of a more basic approach to your portfolio, you have to decide if that’s the best place for you. Similarly, if you’re looking for someone who can guide you on socially responsible investing, you’d want someone who is familiar with environmental, social and governance (ESG) funds and knows how to help you invest in them. If you don’t agree with how a planner approaches investing, look elsewhere.

8. How did your clients fare during the downturn?

It’s helpful to hear how someone’s investment approach worked during the most recent recession, as there’s always the chance of another market dip. This question can help you get a read on what that planner learned (if anything) during the market fall and how they’re safeguarding clients against something similar happening in the future.

One study found that the vast majority of financial planners report some level of post-traumatic stress as a result of the recession, so if your planner can’t easily verbalize a strategy for weathering the next downturn, that could be a red flag.

9. Who will I be working with?

Sometimes you’ll have an initial consultation with one advisor at a firm and find yourself handed off to someone else for your regular planning needs. Or you’ll be handled by a different person during each check-in, depending on everyone’s workload.

Gauging an advisor’s response to this question is entirely personal: If you don’t care whom you work with, it doesn’t really matter. But if you like the planner you’re interviewing and you’d like to stick with them, you may not want to hear that you’ll be handed off to someone else at the firm.

10. How do you like to communicate?

Does your advisor prefer to speak to you on the phone, or will they email? Do they mind if you text them? How often will you hear from them? Make sure your communication style will complement the advisor’s.

“I have some clients I don’t really hear from, but they’ll text me,” Cheng said. “I just want people to be comfortable with their money and working with their advisor. That’s why it’s OK for them to send a quick text message. True story: Someone once texted, ‘I’m buying a Tesla. How do I pay for this?’”

In the end, it’s also important to trust your gut. Your planner may give satisfactory answers to all these questions, but you still might not have the best feeling about them — and that’s fine. “We, as humans, have very good gut instincts, but we tend to ignore them at times,” Pressman said. “It doesn’t matter if a friend referred you or if you read great things about this person. There are enough good financial planners out there that if this one isn’t hitting all the boxes, move on.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Review of Altfest Personal Wealth Management

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Altfest Personal Wealth Management is an investment management firm based in New York City. The firm typically only accepts clients with a minimum investment of $1 million. For these high net worth clients, Altfest Personal Wealth Management provides customized investment portfolios with comprehensive financial planning services. The firm has 16 employees who provide investment advisory services, and currently oversees $1.21 billion in assets under management (AUM).

All information included in this profile is accurate as of February 10th, 2020. For more information, please consult Altfest Personal Wealth Management’s website.

Assets under management: $1,210,000,000
Minimum investment: $1 million (waivable at the firm’s discretion for young professionals)
Fee structure: A percentage of AUM, ranging from 0.50% to 1.40%, depending on account size; hourly fees; fixed fees
Headquarters: 445 Park Avenue
Sixth Floor
New York, NY 10022

Overview of Altfest Personal Wealth Management

Dr. Lewis Altfest launched Altfest Personal Wealth Management in 1983. He is still the majority owner of the firm and acts as CEO. He runs the organization along with his wife, Dr. Karen Altfest, the firm’s executive vice president, and their son, Andrew Altfest, the firm’s president. Both Lewis and Karen hold Ph.Ds; Lewis is an associate professor of finance at Pace University.

Including the Altfests, the firm has 37 total employees, 16 of whom provide investment advisory services. Altfest Personal Wealth Management specializes in creating customized, actively managed investment portfolios for high net worth clients. The firm and the Altfest family have won numerous awards for their performance, and both Lewis and Karen are regular contributors to financial news programs and publications.

What types of clients does Altfest Personal Wealth Management serve?

Altfest Personal Wealth Management primarily works with individual investors. A client usually needs a portfolio of at least $1 million to open an account with the firm — however, Altfest does make exceptions to this account minimum for “young professionals” who they believe will become high net worth clients in the future. The firm’s individual client base is currently split 40/60 between individuals and high net worth individuals, with the SEC defining high net worth individuals as those with at least $750,000 under management or a net worth of at least $1.5 million.

While the firm works with a diverse range of clients, it specializes in advising women, executives and healthcare professionals. In addition to individual investors, Altfest Personal Wealth Management also works with pension plans, profit-sharing plans, trusts, estates, corporations and other business entities.

Services offered by Altfest Personal Wealth Management

Altfest Personal Wealth Management specializes in investment management and financial planning. However, the firm’s investment management services are available to individuals and small businesses only; these services are not offered to investment companies, pooled investment vehicles, large businesses and institutional clients.

Most of the firm’s investment accounts are run on a discretionary basis, meaning that Altfest Personal Wealth Management advisors can make trades on behalf of the client. The firm does have a few nondiscretionary accounts, where the client must approve all trades themselves.

If a client only wants a few investment recommendations, rather than the management of their entire portfolio, the firm can provide this service as well.

Altfest Personal Wealth Management also offers comprehensive financial planning, as many of its advisors hold the certified financial planner (CFP) designation, a professional certification for financial planners. The firm’s financial planning services include the creation of a detailed financial plan outlining the necessary steps to achieve their goals and objectives. The plan can address specific areas, such as college savings, estate planning and debt management.

More specifically, Altfest’s services include:

  • Investment advisory services and portfolio management (mainly discretionary but some non-discretionary)
  • Financial planning
    • Retirement planning
    • Trust and estate planning
    • Charitable planning
    • Education planning
    • Tax planning
    • Cash flow forecasting
    • Budgeting and strategic planning
    • Long-term care planning
    • Debt management
    • Divorce planning
  • Insurance and risk management
  • Workshops and seminars
  • Newsletters and publications

How Altfest Personal Wealth Management invests your money

Altfest Personal Wealth Management builds unique, customized portfolios for each client based on their time horizon, risk tolerance, income level and long-term goals.

As part of this analysis, the firm follows a system called Total Portfolio Management. Rather than only looking at a client’s investment history, the firm also gets to know their entire financial plan, including income, debts, spending requirements and future earnings potential. The firm uses this information to finetune a portfolio comprised of stocks, bonds, mutual funds, ETFs and private funds.

Altfest Personal Wealth Management follows an active investment approach: this means the firm is regularly trading in an attempt to earn above-average portfolio returns.

Fees Altfest Personal Wealth Management charges for its services

For portfolio management services, Altfest Personal Wealth Management charges a fee based on a percentage of assets under management, with the rate ranging from 0.50% to 1.00%, depending on the size of the client’s portfolio. Altfest does not charge trading commissions or performance-based fees.

Portfolio Size Annual Asset-Based Fee
First $3 million* 1.00%
Between $3,000,001 and $6,000,000 0.75%
Over $6,000,000 0.50%
*If a portfolio falls below $2 million in value at the end of the quarter, the firm will assess an additional 0.10% fee on top of the asset-based fee listed above.

For “young professional” clients who don’t meet the firm’s portfolio minimums, Altfest charges the following fee schedule:

  • In the first year, the firm charges an annual fee of either 1.10% of assets under management or $2,500 whichever is greater.
  • After the first year, the firm charges 1.10% of the portfolio value or $1,500 per year whichever is greater.

This rate includes cash flow analysis, investment analysis, investment management and 401(k) recommendations. Clients who want additional financial planning services will be billed at a rate of $250 per hour.

If a client only wants standalone investment recommendations, Altfest Personal Wealth Management charges either an hourly fee ranging from $500 to $800 an hour, or a fixed fee of at least $3,500 for specific investment recommendation requests.

Finally, some of the investments included in Altfest’s portfolio recommendations may carry additional fees. Clients are responsible for covering these costs, though the money won’t go to Altfest Personal Wealth Management.

Altfest Personal Wealth Management’s highlights

  • Wide range of awards: Over the past few years, Altfest Personal Wealth Management has been recognized as a top investment advisor by publications including Barron’s, Forbes, Financial Times and Financial Advisor magazine.
  • Highly educated management team: The heads of the firm, Dr. Lewis Altfest and Dr. Karen Altfest, both hold Ph.Ds; Lewis is also an associate professor of finance at Pace University. In addition, many of the financial advisors at the firm hold the CFP designation.
  • Customized investment approach: Altfest Personal Wealth Management designs a customized portfolio for every client, tailored to their specific needs, and don’t lump people into one-size-fits-all funds as some firms may do.
  • Extensive financial planning in addition investing: Altfest Personal Wealth Management also specializes in financial planning. When the firm creates a portfolio recommendation, it goes over a client’s entire financial situation before designing the portfolio, not just their existing investments.
  • Specialty in advising women, executive and healthcare clients: The firm specializes in advising women, executives and professionals in healthcare. Additionally, Forbes named Dr. Karen Altfest one of the top women advisors in the country in 2017, 2018 and 2019.

Altfest Personal Wealth Management’s downsides

  • Above-average investment fees: Altfest Personal Wealth Management charges an annual 1.00% asset-based fee on the first $3 million in a client’s account (plus an additional 0.10% per quarter if their portfolio value falls below $2 million). In comparison, the median investment management fee charged by firms for accounts over $2 million is 0.75%, according to Kitces.
  • High minimum to open an account: It takes at least $1 million to open an account with Altfest Personal Wealth Management. While the firm does waive the minimum at its discretion for “young professionals,” the typical investor would need to be quite wealthy to make use of the firm’s services.
  • Only has one location in New York City: The only way to visit the Altfest Personal Wealth Management office in person is in New York City, the firm’s only location.

Altfest Personal Wealth Management disciplinary disclosures

Whenever an SEC-registered firm or its employees or affiliates face disciplinary action, including a criminal charge, a regulatory infraction or a civil lawsuit, the firm is required to report that incident in its Form ADV, paperwork filed with the SEC. Altfest Personal Wealth Management reports in its Form ADV that it has faced no such incidents over the past 10 years, indicating a clean disciplinary record.

Altfest Personal Wealth Management onboarding process

To start the onboarding process with Altfest Personal Wealth Management, you can request a free consultation with one of its advisors. You can contact the firm either by phone at 212-406-0850, by email at [email protected] or by filling out a form on the firm’s website. As part of the onboarding form, the firm asks you to share your story, which helps the firm start determining whether you are a good fit based on your income and profession.

If it seems like a good match, the firm’s advisors will then get to work designing your customized investment portfolio based on your goals, risk tolerance and overall financial situation. When you’re ready to launch, the firm’s advisors would then take care of opening your new accounts, transferring over your existing accounts, making the necessary investments and keeping up with the records for your portfolio.

The bottom line: Is Altfest Personal Wealth Management right for you?

If you’re a high net worth individual or a young professional who wants personalized investment recommendations combined with financial planning, Altfest Personal Wealth Management could be a good choice. This may be especially true if you are in one of the firm’s specialty client categories: women, executives and healthcare professionals. Since Altfest Personal Wealth Management only has one location in New York City, however, the firm might be a better choice if you live in the Northeast rather than other parts of the country.

On the other hand, Altfest Personal Wealth Management’s comprehensive services do not come cheap. The firm’s fees are higher than average, and you’d need at least $1 million to open an account (unless Altfest waives the minimum because you’re a young professional). If you want a simpler investment strategy or prefer to manage your portfolio more on your own, you could find less expensive advisors than Altfest Personal Wealth Management.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Your 401(k): Handling Interest Rate Ups and Downs

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Businesswoman examining documents at desk

With any change in the economy or your life situation, it is a good idea to review your investment portfolio, particularly your 401(k) plan, to make sure your investments are structured to meet your needs at retirement. This is especially true when interest rates are rising so you can take maximum advantage of those high rates. There’s also benefit to checking on your investments when rates are down; certain investments will actually be worth more and you can make a profit by selling or simply enjoy your higher-earning investments.

Interest rates rise and fall based on changes in the economy. The Federal Reserve (the Fed) may lower rates to support the economy when it’s going through a weaker patch and may choose to raise interest rates as the economy begins to gain strength.

Either way, there’s no need to panic. We’ll help you understand what happens to your 401(k) investments in either situation.

What to ask yourself when reviewing your 401(k)

A 401(k) is a savings vehicle that many companies make available to help their employees save for retirement. For tax year 2019, you have until April 15 to contribute up to $19,000 of your earnings into your 401(k) on a pretax basis, meaning anything you contribute is not taxed until you withdraw it, usually at retirement. For 2020, you can contribute up to $19,500.

Some companies match employee contributions up to a certain limit that varies by employer. These contributions are not taxable to you until you withdraw them. Companies offer employees a variety of 401(k) investment options. Some larger companies allow employees to choose from a dozen or more mutual funds, including various stock, bond and real estate funds.

While any time is a good time to review your 401(k) investments, a rise (or fall) in interest rates is a particularly good time to make certain your 401(k) investments meet your needs based on your age, years until retirement and risk tolerance, among other factors.

Virtually all 401(k) plans offer one or more fixed-income investment options. These typically include both government and corporate bonds of varying maturities. For example, a fund might offer a mutual fund that invests in short-term Treasury bills, one that invests in long-term Treasury bonds and one that invests in corporate bonds. Some companies might even offer a fund that invests in so-called junk bonds that pay a higher rate of interest in return for the risk of investing in low-quality bonds.

What to expect when rates rise

An increase in interest rates will eventually have an impact on the types of fixed-income funds in a 401(k). A fund that invests in short-term Treasury bills will react quickest to this change. When the bonds that the funds hold mature over the subsequent year, the fund manager will reinvest the proceeds in bonds that pay a higher rate of interest.

A corporate bond fund, on the other hand, includes bonds with varying maturities. It may take time for the fund to invest its assets in bonds that pay higher interest, as most fund managers spread their investments over maturities between one and 30 years so that at least some bonds are always maturing to potentially be reinvested at a higher rate.

A rise in interest rates also will affect the price of existing bonds in a portfolio. Say the corporate bond fund you own has an XYZ Company corporate bond that pays 4% interest. As market interest rates rise, the value of that bond will decline to a point where the current yield on that bond is closer to the market rate. Since most fund managers anticipate that interest rates will rise, they have structured their portfolios to minimize the impact that an increase will have on the fund’s value.

Let’s return to reviewing your 401(k) investments. When you started your job, you probably picked a mix of investments and haven’t made any changes. That’s fine if you started your job two years ago. But if you have been working for the same company for 10 years, a review is a good idea.

Let’s say that when you started working for the company at age 30, you were single and invested 90% of your 401(k) in stocks and just 10% in bonds. Now, fast-forward 10 years. You got married. And while retirement is still at least 25 years away, it is something you can begin to see on the horizon. It might be a good time to increase your fixed-income allocation to add greater stability to your 401(k) returns — especially if interest rates are rising.

What to expect when rates fall

It’s important to keep in mind that interest rates also can fall. The bad news is this typically happens when the economy isn’t doing so well. The good news is your higher-rate fixed-income investments will be worth more. You can choose to sell them and take the profit or hold them and enjoy earning a rate that’s higher than the one currently available.

Investing when interest rates are falling requires a different strategy. Young investors with many years until retirement who have the bulk of their 401(k) investments in stock should be able to ride out a period of low interest rates without significant impact.

Older investors who see retirement on the horizon or are already retired will find falling interest rates more problematic. Their investments may be concentrated in fixed-income vehicles, or they may be seeking solid long-term fixed-income investments to pay them the retirement income they need. Since nobody can predict how long rates will continue to fall, buying fixed-income investments with staggered maturities, sometimes called a bond ladder, is the best way to make sure you always have money available to take advantage of rising interest rates when they happen.

What’s ahead for 2020

The general expectation for 2020 is that market interest rates will continue to decline. The Federal Reserve has put the federal funds rate on an indefinite pause since its series of three rate cuts in the second half of 2019. In response, banks lowered their own rates and continue to do so overall.

If the Fed does make a change, it is largely expected to be another rate cut rather than a rate hike. This is thanks to outside risks to the economic outlook, namely weaker global growth, trade negotiations and the recent coronavirus outbreak. The Fed’s three rate cuts in 2019 were designed to support the U.S. economy in the face of these threats. If they continue to weigh on the economy, which is performing pretty well on its own, the Fed will be more likely to cut rates to continue that support.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.