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New year, new adviser? 5 questions to ask your financial adviser

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Many people make a resolution to spend less and save more each new year.

According to Time magazine, getting out of debt and saving money is one of the top 10 broken resolutions. Unfortunately, the person guiding your financial goals may not always have your goals and best interests in mind.

This year, you should start fresh and revisit your relationship with your adviser to ensure you achieve your resolution to save more. There's a misconception that, when you sit down with a financial adviser, that person will automatically look out for your best interests and what's best for you. Unfortunately, sometimes financial advisers are no more than salespeople trying to steer you to high-priced financial products. They may sell you a product that nets them a commission but doesn't really enhance your portfolio at all.

With that in mind, here are five questions you should ask your financial adviser — or a prospective one — to make sure you meet your resolution to save more in 2014.

1. How are you compensated for your services?

This is perhaps the most critical question you can ask. Some advisers receive a commission when selling products, while some work on a fee-only basis. When advisers work on commission, they face an inherent conflict of interest, because in order to make money, they can be inclined to recommend products that pay higher commissions, whether those products are really best for you.

Fee-only advisers are compensated solely either from fees that are calculated as a percentage of assets managed or a flat dollar amount. These fees aren't contingent on the sale of a particular product and therefore have no inherent conflict of interest.

2. Do you have a fiduciary requirement?

Advisory firms that are registered investment advisers (RIAs) have a fiduciary requirement, which means they are required to act in their clients' best interests or face serious consequences if they do not. When choosing an adviser, most consumers would prefer to work with someone they know has to put clients' interests first. This is an important question to ask, because very few advisers are subject to the fiduciary requirement to do what's best for their clients.

3. What are the total expenses of my investment portfolio?

When working with a commissioned adviser, you may not see a breakdown of your actual fees and expenses on your statement. These fees are hidden and can be substantial. With fee-only advisers, fees are often shown directly on the statement and are more transparent.

So dig into the expenses with your adviser, because it's your responsibility to know the true cost of your investment portfolio.

4. What is your investment philosophy?

The adviser should have a detailed investment philosophy covering how the handling of asset allocation, diversification and the strategies they follow in managing your investments. A long-term, low-cost, broadly diversified approach usually works better than focusing on certain asset classes, trying to time the market, or picking what the adviser thinks is going to outperform.

Avoid those who claim to have a crystal ball.

5. How diversified is my portfolio?

Having proper diversification among asset classes is crucial to a portfolio, helping to provide solid growth during good market conditions and weather the down markets. Portfolios that focus too heavily on certain investments or asset classes can be extremely volatile and can underperform the market over longer periods of time.

After answering these five questions, determine if the adviser is someone you can understand, relate to and trust in securing your financial resolutions and future.

Tracy S. Burke, CFP, ChFC, is an investment consultant with Conrad Siegel Investment Advisors Inc., an independent investment and financial advisory firm based in Harrisburg. The firm provides independent investment advisory services to retirement plans and high net worth individuals. He can be reached at 717-652-5633 or

The information contained herein is not necessarily suitable for everyone and should not be construed as personalized investment advice or legal advice. You should consult with an attorney and/or investment professional prior to taking any action. Information presented herein is subject to change without notice and should not be interpreted as a solicitation or attempt to effect transactions in securities. Conrad Siegel Investment Advisors, Inc. ("CSIA" or the "Firm") is an SEC registered investment adviser with a principal place of business in the Commonwealth of Pennsylvania. CSIA may only transact business in those states in which it is noticed filed or qualifies for a corresponding exemption.

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