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How to Choose an Advisor

How to choose a financial advisor?

Written By: John Klotz
1-28-2008
If you speak with most people, you will find they have an accountant a lawyer and a family physician. There is one more advisor that they count in on their team and that is a financial advisor. Infact, this is probably one of the more important relationships that one will maintain throughout one’s lifetime.

Yet, if a financial advisor’s role is so important, how does one go about choosing a person for this role? What do you look for and how do you evaluate the individual’s fit to your financial needs? Do you look for someone you like, or do you shop for qualifications? Or just go on a reference from a friend?

Here are some tips on how to choose an advisor:

Do Some Research
Start by asking around your friends, family members, or co-workers. Ask whom they use and how it has worked for them? Has their portfolio grown? Are they happy with the advice they are receiving? Is the advisor only interested in big fish clients? Or would they take on smaller accounts if there were an upside potential with the client?
Get out to financial planning seminar. Go and listen to a few planners present their know how. Have a conversation with them. Stare them straight in the eyes and ask them if they would be sincere about taking on a new client?
3) Ask Questions: Before you hand over your hard earned life savings for an advisor to handle, ask a lot of questions. Find out about the advisors firm and their professional profile. How many years have they been licensed for, what are their professional qualifications? How does the person get paid ie commission or fee for service? Ask for referrals. That being said, very often the relationship between advisor and client is often confidential. Arranging referrals by clients can compromise the advisor’s fiduciary duty of being completely confidential about his or her clients. But ask anyway.

4) Arrange a face to face interview with the advisor. Consider this like going to purchase a home or automobile. Do you buy the first house you see? Should you marry the first girl/guy you kiss? In this regard, you should arrange a few meetings with different advisors. Get a feel for whom you feel more comfortable with? Ask questions like:

• What are your areas of expertise?
• How do you provide services that are outside your expertise?
• Describe your typical clients and what you do for them.
• How can you help me plan my financial future?
• What is your approach to saving and investing?
• How often will you review my portfolio?
• What kinds of statements or other information will be sent?
• How are you compensated — by fees paid by me or by commissions from what I buy through you?
• What do I receive in return for the fees or commissions?
• Provide me with names and phone numbers of clients who are on your reference list.

Check References
Once you feel comfortable with your choice, ask for the names an phone numbers of several clients who are willing to be used as references. Call one or more to get an opinion of the advisor’s strengths and weaknesses.
Education and Gray Hairs Count – Imagine, visiting a physician who did not attend medical school? Going to a dentist who never went to dental school? At the same time, would you hand over your finances to someone who never took a financial planning course (other than Selling Whole Life Insurance 101). The financial services industry has wonderful educational courses that elevate planners to a fiduciary role through designations and accreditations. An example is the CFP (Certified Financial Planner) designation, the CLU (Chartered Life Underwriter) designation, the CIM (Certified Investment Manager) to name a few. These are highly technical programs that require vigorous study and ultimate know how. There are codes of ethics through these programs that instill the needs of the client over the needs of the advisor. Truly, an educated, designated advisor places the needs of the client above his or her own needs.

Communicate Your Needs and Expectations to your advisor. Share with them your goals and your tolerance for risk. Set up a schedule of how you would like to be serviced. Many advisors often enter into contracts with clients where they promise to deliver a certain level of service. This level can be monitored and, if it is not up to the client satisfaction, the relationship can and should be terminated by the client.
8) Be In Charge of Your Financial Plan
Never take any advice you don’t understand or which makes you uncomfortable. Your advisor may be the expert — but you are the boss. Be proactive. It’s your money being put to work.

This article was written by John Klotz. John is President of Northwood Mortgage Life. You can reach John at 416-969-8130 ext. 230 or email at john.klotz@northwoodmortgage.com

  1. Past Comments
    Past CommentsDec 21, 2011

    Good point. I hadn’t thought about it quite that way. 🙂

  2. Past Comments
    Past CommentsOct 12, 2012

    An intelligent point of view, well expressed! Thanks!