With the long year of market turmoil, some of you may be thinking of switching to a broker or financial adviser or switching firms that provide these services. I though I would offer some thoughts to help you interview the new firm and see if it is suitable for you.

Full service brokerages and financial advisers usually have in house analysts that research investments and then release their recommendations to the sales force. The sales force in this case is your broker or financial adviser. The firm can make money from these recommendations through the commissions generated from client buys and also from mutual funds (the fund pays the adviser a "commission" for selling the fund).

I think an important aspect of using an adviser or broker is to understand how they help you manage your money and specifically, cut losses. Many firms recommend stocks and mutual funds under the buy and hold theory, but this only works if the stock or fund is going up. When it is not, there should be a plan to decide when the investment choice has gone against you and it's time to cut losses and move on.

So here are a few questions you may want to consider asking your new firm (maybe you should ask your existing firm):

Does the firm front run recommendations?

This means that the firm will take a large position in the recommendation and then sell to the clients from their inventory at a slight markup.

Do the brokers/advisers buy the same recommendations?

Some firms have a policy of being neutral and don't allow the brokers to buy the recommendations. That's o.k. If they do, then you know that the brokers are placing their money where yours is. If the firm does not restrict the brokers from taking the same positions, but they don't, why?

Can the brokers buy or sell before the clients?

Some firms may have a strict policy that prevents the brokers firm buying before the recommendations are released to the clients. Some don't...

Does the firm have a preferred client list that receives recommendations before other clients?

Are you going to be on that preferred list or how does someone qualify to be on that list (probably high net worth and large amount invested with firm)?

Will the firm ask about your risk profile and recommend only those investments that fit that profile?

Recommending high risk stocks to someone who wants asset preservation and income is not suitable.

What is their money management policy? What happens if a recommendation is down 10%? 20%? How do they know when to cut losses or take profits?

If the firm can not explain a policy for this then you will eventually wind up with positions that have 30-50% losses (and more).

Remember - in bear markets, he who losses the least comes out ahead. The bear market in general equities can drag on for another 9 or more years.

Good luck.