Managing your investments and developing a financial plan can be stressful. Making rational decisions amidst the stress of market volatility and life’s unforeseen events can be really difficult. More mistakes are made relative to good decisions. To eradicate this complexity, some people choose to hire a financial advisor. Having someone objective provide guidance on the accumulation of assets and growth of a balance sheet can be a tremendous catalyst in accomplishing your goals. Buyer beware, however. Not all advisors are made the same. If you are in the market for a financial advisor, rehearse these three questions before sitting down with a potential suitor:
- Are you a fiduciary? The answer should be “yes” or “no”. Anything other than “yes” is a “no”. Got it? No in between. A fiduciary is legally required to help you make the very best decisions for your specific situation. A non-fiduciary (the majority of financial advisors in our country) simply has to provide suitable advice but not necessarily to act in the best interest of the client. This is not a daily choice for the financial advisor, but inherent within his or her organizational structure.
- How are you paid, and how much are you paid? The answer should be very clear. If they are paid by anyone other than their clients, the “conflict of interest” warning siren should fire off. Many financial advisors offer commission-based products and/or receive revenue-sharing from investments they put in portfolios. Fully understand where their interests and loyalties lie.
- How is your money invested? If the philosophy and funds that govern and make up the advisor’s portfolio vary drastically from what they propose in yours, you should question why.
The answers to these three questions will clearly dictate whether or not you should get up and leave or dig deeper into the service offering. If you do decide to investigate further, touch on the following:
- Onboarding and ongoing client process/experience
- Credentials of the advisors, CFP® is key
- Advisor tenure
- Client retention rate
- History of investment philosophy, how consistent has it been over the firm’s existence?
- How is the firm evolving to remain best in class for their clients?
- Playing “team” with your other advisors (attorney, CPA, insurance agent, etc.)
The absolute non-negotiable in turning the reigns of money management over to anyone has to be a level of ultimate trust. If there’s any doubt, keep looking. Too much is at stake in trusting an outside party to help you accomplish what’s most important to you and your loved ones.
We would welcome an opportunity to help you navigate this process with zero obligations. Give us a call or drop us an email. Stay diversified.