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Tony Robbins: 7 questions to make sure your financial adviser is on your side

I recently watched the Netflix documentary "Tony Robbins: I Am Not your Guru" and it is an inspiring film that makes you want to change your life for the better. If you haven't watched it, I highly recommend it. While Robbins is known for his life coaching, he found that the American public needed to become better educated about their investments and especially their relationship to financial advisers. This year he released his latest book, "Unshakable: Your Financial Freedom Playbook" based on interviews with some of the titans in finance like Ray Dalio of Bridgewater Associates and Vanguard legend Jack Bogle.

In his book, he pointed to seven questions that everyone needs to ask their financial adviser, whether they're looking to manage a few thousand dollars or significant wealth. So today, let's take a look at the seven questions and I will answer them from Runnymede's point of view.

1. 'Are you a registered investment advisor?'

Registered investment advisors (RIAs) are fiduciaries, as opposed to brokers.

Opponents to a fiduciary rule becoming law, like President Donald Trump's chief economic adviser Gary Cohn, find it to be an unnecessary restriction on how advisers can serve their clients, who may want to invest in higher-risk funds. But regardless of your approach or politics, you need to know who you're dealing with.

Runnymede is a RIA and therefore, has been a fiduciary since its founding in 1993. We are firm believers in the fiduciary rule which hopefully will protect investors from being steered into high commission products.

2. 'Are you or your firm affiliated with a broker-dealer?'

There are approximately 310,000 financial advisers in the US, and about 10% of them are RIAs. "Unfortunately, I uncovered a gray part of the law," Robbins said. "And of the 31,000 people that are RIAs, literally 26,000 of them, so the vast majority, are what we call dually registered. That means they're a broker and they're an RIA."

To see if your adviser can switch hats, Robbins recommends looking at the adviser's website and seeing if there's a sentence like, "Securities offered through [adviser's company name], member FINRA [Financial Industry Regulatory Authority] and SIPC [Securities Investor Protection Corporation]."

Runnymede is among the 10%, a pure RIA. We are not affiliated with a broker-dealer so our clients don't have to worry about us switching hats.

3. 'Does your firm offer proprietary mutual funds or separately managed accounts?'

"You want the answer to be an emphatic no," Robbins writes of the two products, which are less transparent and potentially more expensive than a typical mutual fund.  "It probably means they're looking to generate additional revenues by steering you into these products that are highly profitable for them (but probably not for you)."

Runnymede answers this with an emphatic NO. We don't invest in proprietary mutual funds and never outsource the investment decisions to other managers. We own individual stocks, bonds, and/or exchange-traded funds (ETFs).

4. 'Do you or your firm receive any third-party compensation for recommending particular investments?'

"This is the ultimate question you want answered," Robbins writes. "Because you need to know that your advisor has no incentive to recommend products that will shower him or her with commissions, kickbacks, consulting fees, trips, or other goodies."

Runnymede NEVER receives third-party compensation. Ever. Because Runnymede is paid a fee based upon clients' assets, our incentive is to grow and protect their portfolios.

5. 'What's your philosophy when it comes to investing?'

Robbins and Mallouk recommend avoiding high-risk investments for the average investor, but however you want to invest your money, you need to understand how it's being invested.

Runnymede agrees that investors should avoid high-risk investments. Our philosophy is to invest in the highest quality assets.  What further differentiates us from many in the industry is that we believe in taking defensive measures before a bear market hits.

In good times, we buy the world's finest growth companies that are inexpensive and undergoing positive change. We invest in industry leaders that operate businesses with superior economics. We believe that a value price when coupled with steady, consistent, and accelerating earnings growth, has the highest probability to generate superior rates of return.

We also spend many hours of research on the business cycle. We don't believe that you should just set it and forget it. If you think there is high risk of a severe downturn, why would you want to sit in the middle of the storm? There are times to take risk and there are times when risk dictates protecting your portfolio. Runnymede believes in active management of risk by taking defensive measures when risk in the market is high.

Our investment team is always available to answer questions about the overall strategy and individual holdings in a client's account.

6. 'What financial planning services do you offer beyond investment strategy and portfolio management?'

You may only need investment help at your particular stage in life, but you should consider where you want to be headed.

"Ideally you want an advisor who can bring tools for tax efficiency in all aspects of your planning — from your investment planning to your business planning to your estate planning," Robbins writes.

Runnymede offers complimentary financial planning to its clients. Pauline Wang is our in-house CFP and we use MoneyGuidePro planning software to run simulations and assess a plan's potential success rate. If clients need estate planning, insurance or tax planning, we can refer clients to experts in those fields.

7. 'Where will my money be held?'

"A fiduciary advisor should always use a third-party custodian [like Fidelity or Schwab] to hold your funds," Robbins writes. "You then sign a limited power of attorney that gives the advisor the right to manage the money but never to make withdrawals."

This allows you to switch advisers whenever you'd like without having to move your accounts — and it also helps you keep from falling victim to a con man!

Most of Runnymede's clients have their assets at Fidelity or TD Ameritrade, two excellent companies where fees are reasonable.

Third-party custody is imperative to ensure that your assets are safe. The Bernie Madoff scandal demonstrated a pitfall of working with an adviser who is also a broker-dealer. Without the checks and balances of working with an independent custodian, Madoff's firm was able to create fraudlent statements that concealed a massive Ponzi scheme for many years.

Remember that when it comes to your hard earned money, there are no dumb questions. Our clients can read our blog, quarterly commentary, and reach us easily by phone or email.  Ask away! We are here to help find answers.

What questions do you have for your financial adviser?

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About the Author: Chris Wang

Chris Wang

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Runnymede Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.