Friday, August 25, 2017
Choosing the Right Financial Advisor: A 7 Point Checklist
This week at Budget Boss has been all about Financial Advisors and the Financial Planning Industry. It is estimated that you are two times more likely to participate in saving for your future if you use a financial advisor. With a statement like that it makes you wonder why everyone doesn’t use the services of an advisor. I think the answer to that comes down to the advisors themselves. Many of them have created an unapproachability that leaves clients and potential clients hanging. Confusion, fear, and anxiousness shouldn’t exist with an advisor by your side. So why does that occur then? It has to do with the advisor not being the right fit for you. The relationship between the advisor and the client is kind of like a marriage of sorts. You have to click on a certain level. You also have to believe in them as much as they believe in you. I know that I want all my clients to succeed. It is imperative for my career that they do. As I have stated throughout the week, the right advisor for you is not necessarily the right advisor for the next person. In this post, I give you a 7 point checklist to finding the right advisor for you and financial goals.
1) Trust and Transparency
Just like any relationship there has to be trust. The way trust is obtained is through transparency. Everything has to be out on the table and nothing can be hidden. When dealing with financial matters it is important to understand that the trust goes both ways however. Your advisor has to be honest with you, but you also have to be honest with them. Omitting information often time can be a natural instinct when it comes to money issues but it is very damaging as the advisor needs to know everything that is going on in order to make the proper recommendation. If you have an advisor you can trust, you are half of the way there.
2) Works for a Reputable Company
It might be okay to buy your sofa from Bob’s Bargain Warehouse but it definitely is not okay to trust your financial security to them. It is important that your advisor works for a reputable company. This is true because with a trusted company you know they have been around a while and therefore more than likely aren’t going anywhere. You also know that your advisor will have the support of many years in the financial industry at their fingertips. Experts in many different fields are important when it comes to developing a solid financial plan because it is impossible for any advisor to be an expert in everything. There are many areas that will need to be covered, make sure your advisor’s company can handle them all.
3) Empathy and Compassion
I have stated many times that empathy is one of the most important virtues that a person can have. The reason this is important in your financial planning is because often times your finances have a human element to them. This may include debt planning, mortgages, and especially the consequences of health problems. Your advisor should have a level of empathy when it comes to these issues or it will be hard to work with them. Along those lines compassion is key. You don’t want your advisor selling your uncle mutual funds while he is delivering the cheque for your Grandma’s life insurance policy. You should be able to see immediately if this person has these two traits when you meet them for the first time. Open up about your concerns and their reactions will tell you a lot.
4) Chemistry
This might be one of the most important factors of them all. You have to feel comfortable with your advisor. If you don’t feel somewhat happy when you see them than something is wrong. The conversations should be smooth and not awkward. The phone calls should not be dreaded and the feelings need to be genuine. You are more apt to follow the recommendations of an advisor that you have compatibility with than one you do not.
5) Philosophy
You must and I mean must have a compatible philosophy with your financial advisor. This is important for many factors. If your thoughts on money and protection do not align with your advisor, you will either do things you don’t wish to do or do nothing. When you are doing things out of your comfort range fear and stress come into play. When you do nothing than time comes into play which can damage you greatly. How you both feel about risk tolerance, debt, investments, protection, family, and possible even politics should align. Being like minded will allow you to smoothly transition into financial freedom instead of having either internal or external battles with every recommendation.
6) Knowledge
Your advisor should be knowledgeable about the basic premises of financial planning. They should be able to answer most questions easily and have a solid grasp of even the tougher concepts. They should also know their limitations and be able to rely on a team of experts for the stuff they are not completely familiar with. A true understanding of budgeting, debt planning, mortgages, insurance and investments is necessary for any successful financial advisor. They should also be constantly learning and upgrading their credentials. The job of an advisor is lifelong and so to should be the learning.
7) Do your homework
Think of choosing a financial advisor as an audition. Your business is of value to them, it’s what pays their bills. So you have to do your homework in choosing the right advisor. Come with a set of questions for the advisor to answer about themselves. Come with another set of questions for them to answer about your most pressing financial issues. Make sure you look into their company and look them up on LinkedIn, Facebook, and even on their website. Check reviews for their services and ask around. If you take even a little bit of time to do your own research, the quest for the right advisor will be easier than you think.
I have come to realize that I may not be the right advisor for everyone and that’s okay. When it comes to money, people have to feel comfortable with who they are dealing with. They have to have trust, empathy, knowledge, and compassion. It is not a one size fits all kind of industry. That is why I made such a direct post on Wednesday about the banks not being to provide you with what you need. Your advisor needs to be a fiduciary. That means they must always act in your best interests and not their own. Since joining this industry I have met many advisors, some good, others not so much. The good ones all genuinely care about their clients and that is who you need to have to guide you through your financial journey.
“The greatest sign of success for a teacher… is to be able to say, ‘The children are now working as if I did not exist.'” – Maria Montessori
Email – joe@budgetboss.ca
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