Ep. 9 – 21 Questions (Series) – 8. Do you earn fees as an adviser to a private fund or other investments that you may recommend to clients?

Welcome to the Real Retirement Financial Planning Podcast.  This series covers the 21 Questions to Ask Your Financial Advisor.  The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser. Responses to Jason’s questions I read from other advisor websites lacked depth. “Yes,” or “no,” sometimes needs more context and a greater explanation into the whys. The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.


21 Questions to Ask Your Financial Advisor

8. Do you earn fees as an adviser to a private fund or other investments that you may recommend to clients?

Jason is looking for a “No” here.
No, MARGIN does not earn additional compensation for recommending a private fund.  Private investing is heating up as more advisors look to differentiate themselves from the passive investing craze. Many firms have tried to pitch me.
Exhibit A:

Once I started asking more questions, I realized just how little due diligence and understanding there is for these illiquid and esoteric strategies. When, not if, the tide turns in the economic cycle, we are going to see a lot of these deals were just high margin vehicles for the advisor in disguise.
How much more does your advisor really make for recommending a private investment? What is the advisors true experience in the space? If they invest in the private securities with their own capital, how much do they have in as a $ and % of their overall net worth?