OK, you’ve made the decision. It feels great! You’re going to begin working with a Financial Advisor! But now, you have to find one. Where do start? What do you look for? How do you know that they’re trustworthy? What if you make a bad decision? Wow, it’s a lot of work. Maybe you’ll postpone this, and do it another time when you’re better prepared. Yeah, that makes sense, and it feels comfortable. Congratulations, you have just talked yourself out of it!
If this sounds familiar, that’s because it probably is. The selection of a Financial Advisor is an important one. But it’s not as grueling and difficult as many perceive it to be. In this author’s opinion, if you follow some basic, common sense rules, you should be able to easily make the decision and enjoy a very successful, educating experience.
FIND SOMEONE YOU LIKE
First and foremost (I almost hate to include this because it’s so obvious), you have to like the person. Find someone who you enjoy spending time with and talking to. Make it someone you could actually hang out with, someone who is genuinely appealing to you. Whatever criteria you use in this area of the selection process, now is the time to use it.
FIND A REFERRAL OR SOMEONE YOU KNOW
If you can, get a friend to refer you to someone they work with. This way, the Advisor is a known quantity and has an established track record with whatever attributes the person that made the referral feels they need to have in order to be worthy of referring out. Better yet, perhaps you actually know someone who you can work with. This makes the most sense for obvious reasons. Remember though that you will be establishing a business relationship in addition to whatever existing one you already have. Make sure this can be done.
FIND SOMEONE WITH TEN YEARS OR MORE EXPERIENCE
You need to find someone who has survived the high attrition rate associated with this industry. There are many reasons why they leave, but the important thing for you is to find one that hasn’t. Many Advisors you meet today will not be in the business two or three years from now. An Advisor with at least ten years experience has also most likely weathered a good and bad market. Let’s say you found a new Advisor back in the late 1990’s that had only a couple of years under their belt. They would have only seen bull markets, and have the feeling of invincibility when it comes to investing your money. And believe me, after the year 2000, and just after September 11, 2001, your new Advisor wouldn’t have the slightest idea of what just happened and how to handle all the panicked phone calls. And chances are, with only bull market experience, your Advisor you would have had you overly aggressive in your investing and as a result you would have suffered a serious loss. Besides, with 10 or more years in the business, the chances are they’ve been doing something right!
FIND SOMEONE WITH A REAL DESIGNATION
The idea here is to find someone who has taken their job seriously enough to go out and get at least one real designation. When I say real, I mean a designation that requires actual study, and culminates in a monitored exam, issued by a regulatory agency, like the Department of Corporations or the NASD. Nowadays, there are so many made up designations that require only a fog the mirror, online test. You are considered to be in “good standings” if you continue to pay their annual fee. These so called designations are so misleading that many financial services companies have circulated e-mails prohibiting the use of certain designations in conjunction with their company name. If you’ve followed the ten years of experience guideline, it’s likely that by now, if they’re serious, they would have acquired some real designation. Lack thereof does not indicate lack of capability, it simply helps weed out candidates for your choice.
FIND SOMEONE WHO MAKES SUITABLE RECOMMENDATIONS
What is a suitable recommendation? Well, simply stated for starters, it is a recommendation that is made based on your complete answers to their questions. Only by understanding your needs, goals, timeframes, tolerance for risk and previous investment experience are they able to make any suitable recommendations. Many lesser Advisors may make recommendations that are somewhat suitable for you, but are also likely suitable for any quota they’re trying to reach, or vacation they’re trying to win. If the advice doesn’t feel right, kind of like they heard part of what you said, but omitted the rest, you shouldn’t implement. Make sure that they have re-addressed your goals and concerns and that the advice is clearly made because of them. Simple, isn’t it, but commonly overlooked.
FIND SOMEONE WHO CAN CAUSE YOU TO IMPLEMENT
Let’s say you don’t feel well and you go to your doctor. He or she takes your temperature, runs some diagnostic tests, takes an x-ray or two, and asks you a lot of questions. Then, they have you come back a few days later to present the findings along with a treatment plan. The good news is that if you follow the prescribed course of action, your condition will markedly improve, and you’ll be back to normal, if not better. But, what if, for some reason, you decide that you need to talk to someone before you begin your treatment plan, to get their opinion on it. So you call your sister’s husband’s cousin’s ex-roommate’s bother-in-law to see what he thinks. He’s a smart guy. After all, he’s the night manager at the A to Z Food Mart, with an eye on upper management. Well, it turns out, that he doesn’t really have a lot of medical experience or training, and he wasn’t involved in any of the appointments or conversations you had with your doctor. He therefore has no idea what the treatment plan is all about, or why it was prescribed. So what does he do? Well, he doesn’t want to let you down because he knows you think highly of him. And he doesn’t want you to think he is clueless, so he says “You know what, maybe you should think about this. It’s a big decision. Make sure you do the right thing.” Brilliant! What a resource! He has effectively not answered your question, and if you do not move forward with your treatment, no one will ever know if it would have been effective. If you do move forward, and the treatment proves either good or bad, he will still look good. If it works, all are happy. If it doesn’t, he’ll say “I told you so.” He’s covered. You sought advice from the wrong person.
Implementation is the final step in launching your financial plan. Without it, everything up until now has been an exercise in futility, and everybody would have been better off if you hadn’t started the whole thing in the first place, at least from a wasted time point of view. Any changes you do make will be because you have already made the biggest decision in the entire process. You have decided that you trust your Advisor. You need to find someone early on that you trust. Period. After that, all advice given will be accepted by you and will lead to implementation, the most important step. You won’t have to question everything they say, just as you don’t question other professionals in your life who you give complete and unquestioned trust to. This trust will come easily if you have followed the steps in choosing an Advisor.
In conclusion, if you follow these simple guidelines, you will have gone a long way in finding the Advisor that is right for you. And you will have found someone that is able to help you move forward with the changes you need to make to improve your financial life. You will have found someone you trust.