Here are our answers to the five questions you should be asking your Financial Advisor
How long have you been managing other people’s money? What are your credentials?
Donald E Simmons, a Certified Financial Planner, has been offering honest, objective financial advice since 1988. The Simmons Capital Group Team represents more than 75 years of combined experience working with investors. The members of our team have navigated the treacherous and tumultuous environment of the 80’s, 90’s and 2000’s. We are one of the few investment advisor teams in the Capital District with a CFP®, a Chartered Financial Analyst, and a General Securities Principal in our office.
What is your investment discipline?
Our primary expertise is investment portfolio design and management. No one can predict the future, but it is proven that different investment asset classes will perform well at different times. Therefore, in order to minimize risk and provide potentially more consistent returns, we design our portfolios to be diversified across numerous asset classes.
We have a thorough investment process designed to sift through the universe of no-load and load waived investments to find the managers have strong patterns of out performing their peers and their benchmark indexes. By investing in a combination of ultra-low cost index funds, ETF’s and actively managed funds, we design low cost portfolios that have attractive risk adjusted returns. We design a core strategic asset allocation strategy comprised of non-correlated asset classes based upon each client’s risk tolerance, investment goal and investment time. Then we overlay tactical allocation shifts based on market conditions to add value compared to pure indexing or third-party platforms.
Is your compensation Commission Based or Fee Only?
Simmons Capital Group operates as a Registered Investment Advisor (RIA) under the regulations of the Securities and Exchange Commission. As such, our investment advisory services are FEE-Based.
Transaction Based versus Performance Based? Have you ever hired a contractor to do work at your house? If you pay the contractor for the entire project at the beginning, what is the likelihood that he will come every day until the job is completed? Why would you consider paying an investment advisor in advance for an investment that they are selling you in the hopes that he/she continue to provide excellent management for many years in the future? Doesn’t it make more sense to have your advisor’s compensation be tied to the growth of your accounts so that if you make money their income grows, if you lose your money their income declines?
Do you operate under a Suitability Standard or a Fiduciary Standard?
Investors seeking advice should pay the most attention to the regulations surrounding the fiduciary standard. It sounds complicated, but it essentially refers to the guidelines that spell out the obligations financial professionals have to their clients. Currently, there are two standards that financial professionals can be held to -- the suitability standard and the fiduciary standard.
Compensation for registered representatives is based on commissions for products sold. The simple standard was that recommended investments needed to simply be “SUITABLE” for the client. The suitability standard is the least stringent:
It simply requires that investments must fit the clients' investing objectives, time horizon and experience. A broker or agent can satisfy the suitability standard by recommending the least suitable of the suitable options, as long as it falls within the general suitability test. The suitability standard invites conflicts of interest pertaining to compensation, which can vary greatly from one product to another. Under the suitability standard the broker/agent is not required to disclose or minimize his/her conflicts of interest. This often means that the products that are best for the broker also have higher costs for the investor.
On the other hand, the fiduciary standard, LEGALLY requires advisers to act in the BEST INTEREST of their clients. For instance, faced with two identical products but with different fees, an adviser under the fiduciary standard must be compelled to recommend the one with the least cost to the client, even if it means fewer dollars in compensation. As a Registered Investment Advisor, Simmons Capital Group and its members as Investment Advisor Representatives, are held to the same fiduciary standard for their clients as are Trustees of a trust, Trustees of a not-for-profit organization, or board members of an organization. Each can be held legally accountable for failing to act in the BEST INTEREST of the organization/client for which they are acting as a fiduciary. Is your advisor a FIDUCIARY? If so, ask for their Form ADV Part 2, which is filed with the SEC.
What will be my total costs to work with you? (disclosed and embedded)
All annual advisory fees are based on the total assets under management and are offered to clients on a sliding scale as asset levels increase.
The quarterly calculation of advisory fees is based on an average daily balance over the quarter and billed in arrears.
Management Fee - 1.15-1.65% annually (Billed Quarterly)
Embedded Fees of Fund Companies, ETF’s, Etc. - 0.50% - 0.7% annually (embedded by Fund Company)
Total Fees - 1.65% - 2.35% annually