How to Hire an Investment Advisor for Your Estate or Trust

By Margaret Atkins Munro and Kathryn A. Murphy

As the fiduciary of an estate or trust, you may be in charge of assets that require investing. Therefore, it may be wise for you to hire an investment advisor to help invest the assets of the estate or trust. You may choose to hire a Certified Financial Planner, an attorney, a Certified Public Accountant (CPA), an Enrolled Agent (EA), or a stockbroker. Be prepared to smartly negotiate the investment advisor’s payment fees.

An executor or trustee who fails to act prudently to preserve the value of the assets is fair game for a lawsuit. If you’re in charge of assets that require investing, you should protect yourself against charges that you acted improperly. Hiring an investment advisor provides you with an insurance policy against such accusations.

If you want to go with a professional to help you invest the money, you have a few options. Among the professionals who offer financial advice are the following:

Certified Financial Planners: Licensed by the Certified Financial Planner Board of Standards, these individuals have completed extensive additional education in addition to their bachelor’s degree.
Attorneys, Certified Public Accountants (CPAs), or Enrolled Agents (EAs): Their training isn’t specifically in investments, but many of them have become quite expert in this area because of the nature of their practice. Don’t assume that every attorney or tax professional is qualified to also act as your investment advisor, but don’t rule out the possibility, either.
Stockbrokers: Full-service brokers not only purchase and sell securities for you but also research the companies they recommend.

Investment advisors expect to be paid for their expertise, but their fees sometimes seem excessive. When negotiating what you’re willing to pay for these services, watch for certain warning signs:

Commissions: Stockbrokers earn commissions each time they buy or sell stocks on your behalf. When stockbrokers have complete control of an investment account, they may churn the account, placing trades frequently with the sole intention of earning more commissions. If you think your broker is churning, you should question the broker and advise his or her supervisor.
Fee for service: This method is the safest way to pay for advice because you pay only for the time the advisor works on your investments. Of course, sometimes the bill may seem high to you. If you suspect that your advisor is padding the number of hours being billed, request an itemized statement for a breakdown of the charges.
Percentage fees: You’re likely to see these fees from advisors who actively invest for you. The advisor charges quarterly fees based on two components — a percentage of the market value of the security portfolio and a percentage of income earned by that portfolio. If you feel the advisor’s percentages are too high, you can always ask for a lower percentage. The advisor wants your business, and his or her fees aren’t set in stone.

Because investment advisors often have almost unfettered access to the trust or estate’s assets, the potential for abuse can be high. Make sure you check references before you hire an advisor. Don’t shirk your responsibility by assuming that the investments are in safe hands. Review the advisor’s work, asking questions when something doesn’t make sense to you. Remember, someone else placed great trust in you and your judgment when they named you as fiduciary.