Your choice of a financial advisor ranks high upon the list of critical life decisions. Selection of educational institutions, career, where to live, and family create lifelong consequences. Choosing a financial advisor often determines what happens to the financial results of those consequences, all the way from financial independence to financial ruin. Developing a relationship with a financial advisor requires due diligence and review; the advisor that is right for you today may not be the advisor you need in the future. Consider the following keys to selecting and continuing a relationship with a financial advisor.
Choose An Advisor Whose Practice Is Client-Focused
Advisors who build a business – and it is important to remember that it is their business - focus on their clients needs; your dreams, goals and objectives. First, they need to focus on you. Almost any advisor will spend some time early in an initial interview discussing his or her credentials, (as well they should) but the main focus of every meeting should be the advisor discussing your objectives, your resources, and your outcomes. Eighty to ninety percent of an initial interview should be devoted to the advisor getting to know your goals and current situation. In addition, any meeting should lead off with a discussion of your objectives, and whether those objectives have changed in any way.
Everyone needs an advisor that is a general practitioner that is willing to use outside resources to help you realize your goals. However, look deeply at an advisor that attempts to manage client relationships and manage money. Money management demands an amazing amount of time, education, and expertise. Rare is the advisor that can do both. Most advisors are not trained in portfolio management, so look for advisors that know their limitations. If an advisor states that they are an “investment manager” or “wealth manager” ask for their long term results – in writing.
Look for advisors that use a variety of financial instruments and devices to help clients reach their objectives. Advisors that focus on one product as a solution to all problems should be avoided, as should advisors that sell primarily proprietary products. If an advisor with The ABC group offers ABC insurance, ABC mutual funds or separately managed accounts, and ABC annuities – you get the idea – beware. Does this advisor represent you or ABC? Also seek advisors who discuss fees without your having to ask.
Choose An Advisor Who Focuses on Your Goals Instead of Products
Any time an advisor makes a recommendation for change, the conversation should begin with a paraphrase of your objectives. Only after you reaffirm your goals should the advisor discuss the details of changes they propose. If an advisor’s first words focus on a new financial product or service, bring it to their attention, make the advisor tell you why the old solution is broken, and why they changed their opinion of their prior recommendation.
Earlier it was suggested you look for advisors that have broad product offerings. On the other hand, look for advisors that can tell you specifically what they provide in the way of service. Avoid advisors that state they specialize in a large list of services. A brochure that says, “We offer stocks and bonds, mutual funds, annuities, life insurance, long term care, investment advisory services, tax planning, options, retirement planning…” often reveals an advisor who only wants to sell something – anything – to anyone who will buy it from them.
Choose An Advisor Who Offers Exceptional Service
Ask your prospective advisor, “What can I expect from you in the way of service?” Every client deserves exceptional service. You should always expect the following at at absolute minimum, regardless of the size of your account:
- Advice based on a comprehensive discussion of your objectives
- Prompt execution of all trades, orders, documents, returns, and applications
- Prompt return (twelve to twenty-four hours; same day for urgent situations) of phone calls and written correspondence
- An annual review face to face review
Instead of telling the advisor what you expect, ask for his/her service proposition, and see if it matches up with your expectations. You want an advisor that regularly communicates with you, as opposed to someone who only calls when they want you to make a buying decision. You should have reasonable service expectations, but if you don’t feel the advisor is as interested in you after you become a client as they were before you became a client, express your feelings and if necessary, change advisors.
Select an advisor that you genuinely like and respect. While liking an advisor is not a good reason to entrust them with your financial affairs, you want to enjoy the meetings you have with this person who helps guide your financial future.
Beginning or continuing a client-advisor relationship requires homework in the way of research and referral, and an approach based on trust and teamwork. Do not take this lightly; your future could depend on your decision.
