If you decide to hand off your financial future to an advisor, choosing the right financial advisor will be one of your most important decisions you’ll ever make.
This person will be deciding where your money will be invested and what types of risks you’ll be facing.
In other words, your financial advisor will largely influence how much money you’ll earn, and how much money you’ll have when you retire.
Clearly, this person is a big deal.
Today, I’m going to show you exactly what to look for in a financial advisor who cares about you, puts your interest first, and most importantly, makes you good money.
I’d say picking a great financial advisor is about as important as picking a great husband/wife. So this decision isn’t something you can afford to be lazy with.
Two ways to start your initial search for a financial advisor
1. Ask friends and family about their financial advisors and if they like them
There is nobody else you’ll trust more than your family and close friends, so it makes complete sense to get advice from people you trust. They are the most likely people to give you their honest opinion, and that’s exactly what you need when picking a financial advisor.
Here are a few things you can ask them:
- How long have you been with your financial advisor?
- What’s he/she like?
- Do you recommend financial advisors? Is it worth getting one?
- Does your financial advisor make you money?
You’ll learn a lot about the specific financial advisor in question, and possibly about the firm/company that employs him/her.
2. Do a Google search for financial advisors
You’ll find ads plastered all over Google from firms looking for people just like you.
That’s great for you, because it means you have a lot of options. Having options means you can be picky. Don’t settle for less.
So how should you search Google for an advisor? I’d start by looking for a local one in your area. You can type in “financial advisor Boston” for example.
Here are things you want to look for:
Check their website: Is it clean, informative, and professional looking? This matters, because a company that is serious about business will have a serious website made to attract potential clients. I want a company who wants to make money and grow, because in order to do that, they need to make me money and help me grow, too.
Look for testimonials: Whether they come from the website directly, or you find them on a website that rates companies, they are “indicators” that a company is legit and trustworthy. Take them with a grain of salt, but it doesn’t hurt to see them.
Look for statistics: Does the company have any statistics that indicate they are worth your time? If a company has helped many clients grow their portfolio assets, they will sure as hell want to brag about it. Keep an eye on anything that makes them look legit and trustworthy.
Check how long they’ve been in business: A company that has been in business longer is an indicator that they are a quality company. Don’t disregard newer smaller companies all together. But all things being equal, I would check out a company with longevity first.
Once you have a list of companies/people you want to check out further, you’ll probably want to make a phone call or send out an email to learn more about them.
You’re not going to find out that much over the phone, but it’s one of those “let me check it out so I don’t waste my time” steps you can perform in a few minutes.
You’ll want to sit down face to face with your potential financial advisor and get to know them on a personal level. Hopefully you are a good judge of character, because you’ll need to decide if this is the right person to manage your money.
With that in mind, below is a list of things you need to keep in mind when you choose your financial advisor.
9 Characteristics To Look For When Choosing Your Financial Advisor
So what makes a financial advisor GREAT? The following does:
1. A great financial advisor is knowledgeable
Your financial advisor needs to ALREADY be knowledgeable about all facets of finance, not just your specific financial needs. In other words, he/she needs to be well rounded. Because making money with investments isn’t as simple as picking some stocks and mutual funds you think will perform well.
A good investor will need to know other things, like how interest rates affect stock prices, or how plummeting oil prices affects stocks in the transportation industry.
Your financial advisor is YOUR INVESTOR. If he/she is a dumb ass and simply recommends investments based on “well, I think the airline industry could rebound and it could make a nice addition to the growth part of your portfolio”, then you need to run the hell away. Because this type of “guessing” is based on absolute shit.
Smart investing is based on INDICATORS the economy puts out. Like a strong increase in employemt means people have more money to spend, and this likely means companies will sell more products. This equals more profits, and rising stock prices.
Your financial advisor needs to be on top of these indicators to help give you proper suggestions on the types of investments to add to your portfolio, and to correctly rebalance it.
The most important thing you need to figure out is if your financial advisor has a strong grasp of markets and the economy.
The best way to figure this out is to simply ask a question like this:
“If you were to invest in one stock to hold for the next 5 years, what stock would that be?”
He/she can say anything, but the important part to pay attention to is the REASON WHY. As long as the reason why is based off of something tangible, and not just a guess/hunch, you know you’re on the right track.
2. A great financial advisor will attend to you
What’s the most annoying thing about sending emails and making phone calls? When they person you’re trying to reach doesn’t respond in a timely manner.
Your financial advisor needs to get back to you. Period. Even if it’s just a quick phone call to let you know they are busy and will need some time to properly get to your question. I personally demand this type of attention. My priorities needs to be met, or you’ll lose me. Period.
Not only should your financial advisor attend to you in a timely manner, they need to reach out to you on their own. You shouldn’t be the one calling and asking all the time. They need to let you know of changes in the market, changes in your portfolio, or whatever the hell needs to be communicated.
3. A great financial advisor will take the time to educate you
I think most people will be happy with making money and losing just a little. However that happens probably doesn’t matter to most people. That’s “their” business. As long as things are peachy, that’s what most people care about.
That can work. I mean, as long as things go well.
But don’t you want to know what’s actually going on with your investments? Let’s say you get a phone call from your advisor and he tells you your technology stocks have soared 1000%, and you’ve made $3000 from it in the past 3 months. Shouldn’t you want to know WHY, and more important, have REAL input on what to do next?
If you are financially illiterate, you won’t have a clue what to say, beside “oh great! What should we do now?”
Yes, I know this is your advisors job to perform, while you take care of the “important” stuff in your life. I think this is a mistake, and your finances is something you should be intimately involved in – even if you have someone looking after them for you.
A good financial advisor will take time to teach you about what’s going on with your investments, not just report to you what is happening.
You can tell if an advisor is the “teaching” type, because they will naturally explain things to you, and explain why. Make sure to let them know you’d like to learn about your investments and basic finance so your advisor knows what you want from him/her. They need to understand what you want as much as you need to determine if they are the right choice.
4. A great financial advisor will charge reasonable fee’s, and be transparent about them
Whether your financial advisor charges fees based on a flat rate or commission, you need to know exactly what they are up front. No surprises, no hidden fee’s. Reputable companies knows people don’t like random fee’s that pop up because it pisses people off.
A smart company will clearly disclose how much money you will be charged for their services. Your job is to make sure it’s reasonable and fair. You can ask your potential advisor to compare their fee’s with other similar companies, and then go home to do some more research on your own to make sure the fee’s are all right.
5. A great financial advisor has a history of good performance
You will want to choose an advisor that is experienced. Along with experience, he/she needs to have a history of success.
I wouldn’t put my hard earned money into something that hasn’t proven anything. Why? It’s not like there is a shortage of advisors. YOU have choice. Choose someone who has shown they can win. It’s really as simple as that.
Ask your potential advisor about their past performance. Get them to show you some statistics. You can even ask for referrals to call.
6. A great financial advisor will take the time to understand your needs
Every person has specific needs. A financial advisor who gives a “wide net” of advice to a specific person isn’t someone you want to hire. You can get that type of advice for free on the internet.
You want someone who will tailor specific solutions FOR YOU.
You’ll know your advisor is good at tailoring solutions to you if they ask you tons of questions. An advisor really needs to know a lot about you in order to give you the best advice.
Some things a good financial advisor will ask you about:
- How much money you make
- How old you are and when you want to retire
- How risk tolerant you are
- What investments you have now, and what you’ve invested in before
- Who your previous advisors were, if any, and why did you leave him/her
- What you look for in an advisor
- How much money you’d ideally like to make
Some of these questions are obviously very personal and you will probably be a little uncomfortable answering them in front of a person you are meeting for the first time.
You can give “vague” answers for now. But get excited that your potential advisor is really wanting to learn about you. It’s a strong indicator that he/she is a good advisor.
I spoke a bit about this above, but I felt it needed it’s own topic. A good financial advisor understand people are different and have different needs. These needs are uncovered by asking good questions.
When your advisor learns about you, he/she needs to continue learning about you. Let’s say you get married to someone who has a shit ton of money. Great!
Maybe you don’t need to be invested in as many risky securities anymore. An ideal advisor will take an interest in you and recognize your new life change could possibly mean you should rebalance your portfolio.
8. A great financial advisor will have a history of clients just like you
It’s great if an advisor has a history of generating clients wealth. But what about generating wealth for a person LIKE ME??
That’s what you need to find out. Because managing a portfolio for a 60 year old widowed woman is much much different than managing a portfolio of a 25 year old graduate. These people have completely different needs and will need different types of investments.
Do your best to get an advisor who has worked (and succeeded) with many people who are just like you. It’s yet another indicator that this is the right person to manage your money.
9. Above all, a great financial advisor will give a shit
I worked in a bank during the financial crisis of 2008 and I remember sitting in a room next to one of our financial planners. She was getting barraged with phone calls from her worried clients. The markets were plummeting and her advice was “just stick with it, it’s going to bottom out soon”.
She gave the same advice to everyone who called.
I didn’t find her advice very “knowledgeable” or “tailored”. Above all, I didn’t feel she truly gave a shit. As long as she was getting paid and making her bonuses, I guess?
That’s the problem you face when you have someone else managing your finances.
Nobody will look after your finances better than yourself. But if you must let someone else manage your money, make sure it is someone who truly cares.
If you do your due diligence by looking for investment advisors who tick off the 8 boxes I listed above, you have a strong chance of finding an advisor who will truly care about you.
Take your time finding an advisor. This is your financial future we’re talking about. You didn’t choose your husband/wife/girlfriend/boyfriend/lover/whatever after a quick phone call, so you definitely shouldn’t choose your money manager like that.
After all, money is just as important as love, …. dare I say, more? 😛
Honestly, just take your time finding your financial advisor. It truly is a big step. Good luck.
Got any questions about choosing a financial advisor? Got any good or bad stories about financial advisors you’ve had? I’d love to hear about them in the comments.