How Good Is Your Financial Advisor?

Trust me ...

Using a specialist in any field is usually a smart idea and financial management is no different. But the key to picking the right candidate is understanding what services you are buying and what should you expect in return. If you have an advisor or are planning to hire one – use this checklist to get ready for the interview.

Who pays the advisor?
The answer intuitively is you but that may not be the case. A fee based financial advisor may charge you an hourly fee for consulting versus a broker – who may be paid by the brokerage firm or financial establishment. The key here is understanding – whose interest is paramount in the advisors mind – yours or the entity that pays him.

What is financial management?
Is it the 401(K) or the equity portfolio or the 529 plan or … it is all the above and then some. Unless you specifically seek limited guidance, a financial advisor should review your complete financial history and provide holistic advise across all spectrums of your financial life.

How are we doing?
What is your portfolio’s rate of return? Are you making money? Are you beating the market – consistently? A professional is always looking for trends, insights and lessons learned by evaluating historical records. If you don’t know how you are doing – how will you tweak things to get better?

Where are we headed?
If your advisor is seeking to provide holistic and pertinent financial advice – he or she should understand your life objectives. When do you want to retire, what are upcoming education/college expenses, aspirations for a second career, housing decisions etc. are all facets of your life that will dictate how your financial well being evolves. An advisor should work with you to incorporate life events and milestones into your financial plan.

How smart is your financial planner?
In other words – finance is an evolving field and the people who excel in this field need to keep up with the latest and greatest. The latest assets classes, new ways of investing, hedging strategies, diversification model and use of the latest financial products/technologies are some areas where you seek competency. If you cannot keep up with the latest mumbo-jumbo coming out of Wall Street – that is fine but your financial advisor better be able to track, interpret and include some of these new innovations into your portfolio. Remember – you are looking for a specialist not a generic hold & pray guru.


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