How to Chose a Financial Advisor

​​You’ve read the standard advice:

Check to see if there have been any complaints against the advisor, ask about his credentials, ask about his investment process, etc. etc.

While checking credentials is a good idea, it won’t tell you whether you can trust this person, whether you’ll achieve your goals or whether you can “connect” with him in a way that is meaningful to you.

So how should you choose an advisor?  Suppose you meet with three advisors, how can you evaluate who will be the right fit for you?

1. Know you have a role to play

Start by understanding that you have a role to play in the selection process. Be clear on why you want a financial advisor, what are your goals, what’s important to you in working with one?

Do you want someone your own age? With a similar background? Does it matter to you whether or not you have similar interests? Are you willing to take a lot of investment risk or would you describe yourself as willing to take some risks? Or are you more conservative?

Think these things through and make a checklist for yourself of everything that is important to you, before you meet so you know what you’re looking for.

2. Take your time

Be prepared to put in some time in finding the right advisor. Remember this is an important decision. You want someone you feel comfortable sharing your life goals with and you are under no obligation to make a decision in the first meeting. A good advisor should not hesitate to meet with you more than once without pressuring you to choose him.

You can meet at his office but it is perfectly okay to ask him to come to your home – in fact you should. If he is reluctant to meet at your home or more than once or you feel pressured – it’s a good sign that you probably won’t be happy with this individual.

3. Pay attention

If he starts the meeting with his “pitch” about his ability to invest, stop him. Tell him you’d like to get to know him first.  Watch to see how he reacts: does he welcome the opportunity or look annoyed?

Watch for how he talks about his family, his associates, and his firm. How he behaves, how he treats his staff (if you are in his office) and family and how he reacts to you will tell you a lot about his values. (One woman told us she disqualified an otherwise seemingly acceptable advisor because he kept referring to his staff as “the gals.”)

Some things to listen and watch for:

  • he only talks about what “he” does and does not include others on his team

  • he is boastful talking about “his” success and talks about rates of return “he’s” delivered for clients not the “goals” they’ve achieved

  • he is not interested in you as a person, your family or life, he just wants to talk about your assets

  • if you are meeting the advisor with your partner you notice he only addresses your partner

  • if you meet at his office, what does it look like – are there family pictures, is it neat or messy – how does it make you feel, comfortable or uncomfortable.

4. Listen to how interested he is in you

A good indicator  of how well a person will represent your interests is whether or not he cares and asks about what’s important to you and how you see the world.

Some things he should be asking

  • Tell me more about yourself and your family.

  • Describe the life you hope to lead by investing successfully.

  • Who are the people in your life who matter most?

  • What are the life goals you want to achieve by investing?

  • Tell me about your previous experiences with investing.

  • When and how did you learn about saving and investing?

  • What type of relationship matters to you when working with an advisor?

  • How involved would you like to be as we invest to achieve your goals?

5. Ask, ask, ask…

Never lose site of the fact that you are the client. Remind yourself – there is no such thing as a stupid question.

Ask him about himself -- his family his beliefs, his hobbies -- anything that you feel would help you connect with him on a more personal level.

Ask about fees – after all you wouldn’t buy anything without knowing how much it is going to cost. Remember, no matter how he puts it – you will pay fees one way or another. If he looks uncomfortable and rushes through an answer, it’s a sure sign this is not a person you should be working with. Some fee related questions to ask: What’s the highest fee clients pay? What’s the lowest? What does that pay for?

Ask about his other clients – are they similar to you? how long has he had them? What’s the range of assets he manages on behalf of these clients?

Ask about his business – how long has he been an advisor, why did he become an advisor, what does he like/dislike about being an advisor – think of your own questions.

Ask about the process he applies before investing – If he jumps right into investing, move along. He should be starting by developing a financial plan that spells out your goals, how investment decisions are made (for buying and selling) and where you should be at various stages moving forward.

Ask if he helps his clients learn – if you are interested in learning more about investing. Does he recommend courses? Readings? Does he hold lunch & learns? Webinars?

Ask to see a sample plan -- Is it easy to read, understand and know where you should be? How often does he update the plan? Does he review the plan every time he reviews the portfolio?

Ask about how he invests -- and whether that conforms with your comfort level, but you should leave this to the end once you are reasonably sure you’re comfortable with him.

6. Insist on understanding

Does he use acronyms and jargon that you don’t understand? If he does, stop him and ask him to explain in terms you can understand. Be persistent until you are 100% sure you understand. If he looks or acts impatient or you have the slightest inkling that he thinks you are “dumb” for not understanding – then move along.

Remember – this is his business not yours, there is no reason you should be familiar with “his” business jargon.

7. Check him out

Get references - meet a few of his clients, preferably women (you could go to a lunch & learn or a client appreciation event if he holds them). Follow up with the clients after the event. Get the specifics of why they like working with him.

See if he is reliable – after your meeting ask him to send you something that’s of interest to you or ask him to call you with some follow-up information (doesn’t matter what either is), you just want to see how well he meets his commitments.

8. Go with your “gut”

At the end of the day you have to feel comfortable with this person. How does he make you feel? Do you feel encouraged, confident and good about yourself? Or do you feel, foolish, intimidated, not important? Do you feel that you don’t have enough for him to take you seriously?  Can you see this person as a friend?

Note: we use the pronoun “him” throughout simply because 85% of advisors are men. However, all the recommendations apply equally whether you are interviewing a male or female advisor. Your objective should be making sure you get the advisor, male or female, that you are totally comfortable with.

Interviewed by Kelly Keehn on behalf of the Financial Planning Standards Council, Judy and Paulette discuss how women really choose a financial planner.

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