As a follow-up to our last blog (Can’t I Do This Myself?), we’ll now tackle the subject of how to find the “right guy or gal” to help you manage your financial assets. If you haven’t read the previous blog, go back and check it out. I’ll wait.
Once you’ve decided to make to seek professional advice, how, exactly, do you find the right person? A good place to start would be to ask friends and acquaintances for referrals. Believe it or not, word of mouth references can be very powerful … and on target. Once you have a few names, start the process of interviewing a couple of them. This is an important decision regarding your financial life and you want to make sure you are receiving quality advice and not just being sold a financial product.
“Financial advisor” or “financial planner” is a generic term and can be used by almost anyone. You want to make sure the individual you’re evaluating has a solid background in the financial arena. Many times, a background in sales, communications or even divinity are preferred by some large investment firms because the skills needed to sell a product or save a soul can easily translate into skills to convince you to buy a financial product.
The fiduciary standard, a concept which places your (the client) best interests ahead of the individual advisor’s or those of their firm, should be a given. Many investors aren’t aware that some advisors aren’t required to put the client’s best interest first. Thus, “Are you a fiduciary?” is an important question to ask anyone you are considering to help you manage your money. Their answer should be a simple “yes” or “no” without dancing around with such responses as sometimes they are and sometime not. You don’t need someone who will give you advice and then switch hats and try to sell you a product that will not truly benefit you.
“How are you compensated?” is another important question you should ask. Again, the answer should be clear-cut and concise. How comfortable would you be if a physician didn’t charge you anything but only received his compensation from the pharmaceutical companies whose medications he prescribed? Do you think there would be an incentive to prescribe more than was needed or a medication that paid more than another?
Another question to ask the potential advisor is “What is the investment philosophy that you follow?” Again, this should be a simple and easy-to-understand process. You want to be comfortable with the process that is followed as well as the advisor’s adherence to it personally.
Does the advisor have experience in the tax, insurance and cash flow planning that is required for a full financial plan? Insurance and investments are integral parts of a financial plan but not a means to an end by any stretch. The ability to connect with tax, legal and estate planning professionals or to have them on staff is important as well.
Finally, do you feel comfortable with the advisor? When dealing with your finances, it’s critically important that you have the ability to discuss all factors related to your financial life. Do you feel comfortable sharing those with the advisor? Planning is a lifelong relationship and you want to make sure the person who guides you is someone you trust and truly enjoy being around.
Interviewing and meeting with different advisors and getting a feeling for their different styles and philosophies can help you make the decision that you have the right guy or gal for the job. And in the long run, that will pay you big dividends.