The best way to better investing is to have the right people in your corner.
Finding (and using) the right financial advisor is vital. The good advisors are both trustworthy and competent. They can provide you with the financial advice you need to move forward with the right saving methods (and can even help you establish some alternative saving methods), investment practices, and financial planning. They can give you sound financial advice, direct you toward the right investment opportunities, steer you from the wrong ones, and be one of your longest-lasting professional relationships…if you find the right one.
So with a little upfront effort on your part, you can find the right financial advisor who will look out for you.
1. Get the names of at least three advisors or investment managers from your friends and associates.
Only consider names where your acquaintance actually uses the advisor and has used the advisor for at least a reasonable amount of time. You want to be able to reference what changes they’ve seen in their financial situation. You’ll want to know, at least anecdotally, the status of their savings progress, their retirement accounts, and their various other investments and accounts.
2. Interview each advisor (and tell the advisor that you are interviewing other advisors).
Ask each advisor the following questions:
1. Have you ever been the subject of a client complaint or a regulatory action?
2. How many clients do you have? What is the annual turnover of your clients?
3. Will you provide me with the names and phone numbers of three existing clients and three former clients?
4. Can you tell me how you evaluate your services to your clients?
5. What are your fees? How are they calculated and charged?
6. Will you disclose your fees and all of my expenses each year in dollars, not percentages?
7. Can you provide me with dollar-weighted results for my account?
8. What are you really good at? Financial planning? Insurance? Asset mix decisions? And what are you not good at?
9. How is your own money invested?
10. Where do you live and do you save money each year?
3. Don’t keep a bad advisor around.
This isn’t exactly a tip to finding the right advisor. But it is a tip to keeping one.
While the process of finding a financial advisor can cause anxiety with investors, it doesn’t mean the process should be avoided. Many people don’t consider switching advisors even if they have red flags about their existing advisor. They may see that their investment portfolio isn’t being proactively managed or they may feel neglected. But switching investment managers…again…often feels too cumbersome. Sometimes investors want to avoid difficult conversations or just aren’t willing to take the time to be active.
The investor/advisor relationship requires a constantly evolving, active conversation. The advisor’s position must continually be earned. And the investor’s loyalty must always be deserved.
Advisors must actively demonstrate their commitment to actively managing investments, savings, and retirement funds of their clients. Many advisors are simply talking clients into buying products with high commissions and aren’t actively engaged in their clients’ investment health and activity. Without active financial leadership, investments become neglected.
So if your financial advisor isn’t cutting it, start again at step 1. There are good financial advisors and investment managers. You just need to do the work to find them.