It has become customary to obtain a second opinion when an
individual is diagnosed with a serious medical condition or advised to have
invasive surgery. A second opinion from
a reputable contractor can also be useful if you are contemplating a major home
improvement project. There is another example
where a second opinion can be helpful, and that is in the financial services
area. Suppose you work with a financial
advisor who you have been using for several years to help manage your
investments and/or provide financial planning services, but you are not sure if
you are receiving the quality of service you have been paying for. Worse yet, you may not be sure how much your
advisor is costing you. For these and
other reasons enumerated below it may be beneficial to request a second opinion
from an independent financial professional.
A second opinion can help you determine if you are receiving
sufficient value from your advisor for what you are paying by:
·
determining if all fees are being properly
disclosed to you as some fees may be hidden (e.g., commissions on certain
financial products, investment expenses deducted from your accounts, referral
fees, etc.)
·
advising you whether your investments are
appropriate for your risk tolerance, age and financial situation
·
asking you specific questions (e.g., accessibility
of your advisor, is he or she meeting your investment objectives, and frequency
of reviews)
·
pointing out areas that should be discussed with
your advisor
·
providing you with specific recommendations that
you may wish to share with your advisor
The fee for a second opinion should be based on the time
expended on the engagement at the financial professional’s hourly rate. The independent advisor will need to know the
specific services your advisor is providing, and will ask you for financial
information and records such as tax returns for the last two years, brokerage
statements and other relevant financial data (e.g., retirement plan and annuity
statements). This will enable the
independent advisor to better understand your financial situation and provide
an estimate of the fee to you.
The second opinion should tell you if your advisor is doing
a good job for you and is being reasonably compensated for his or her services. It is often the case that you will decide to
stay with your advisor, but you will be armed with recommendations and suggestions
that will enable him or her to do a better job for you. If the second opinion shows that the advisor
is not giving you sufficient value it may be time to change advisors.
