How To Evaluate and Choose A Financial Professional

“I’m very satisfied with my advisor.”

That’s what we frequently hear when we speak with potential clients regarding their investments. In reality, what we have found over the years of my experience advising new clients is that what they actually were saying was, “I don’t know you that well. I trust my present advisor and really can’t tell one advisor from another.”

We have come to this conclusion because when we’d ask “What is your investment strategy and what defines its success?” rarely could anyone answer, which begs the question. . . why would people say they were satisfied? For many it seems a case of the old adage: “The devil you know is better than the devil you don’t know.”

Financial advising is serious business, one in which your future, including things like college education for children, retirement, a vacation home—or simply feeling confident about your financial security–are at stake. You deserve a financial advisor that you can rely on for the best suitable advice and responsible stewardship over your financial well-being.

What to Expect From an Effective and Reliable Advisor

First and foremost, we believe a good Investment Professional provides is a clear and measurable definition of success. With that, we believe in an advice based approach, which not every Investment professional is licensed to provide. If your Investment Professional is licensed to provide financial advice, your they should write an investment plan or policy statement tailored to your specific situation, needs, and goals. This statement should cover the following objectives and constraints: target returns, risk tolerance, time horizon, anticipated withdrawals or contributions, tax constraints, and regulatory issues, if any. Success varies by individual, so it is imperative that you have a definition for yourself. If a financial advisor cannot help you define and, equally important, regularly track the success of your portfolio toward your desired goals, you may have a reason to be concerned.


Second, we believe a good Financial Advisor communicates clearly and promptly. Many investment strategies can employ vocabulary, including jargon specific to the industry, that aren’t easily grasped by lay persons. Your financial advisor needs to explain their strategies and investment products carefully and patiently in easily understood language. This may also include a detailed description of the Financial Advisor’s personal philosophy that guides his or her approach. Some Investment Professionals don’t have a formal approach to investment management; instead they focus on the sales of a variety of investment or insurance products that may fit a client’s individual need.


In addition, we want you to feel that you are getting personal service that includes prompt responses to your questions or requests, including a face to face conversation at least once a year. We don’t feel you shouldn’t be forced merely to navigate a website where you put in a request for a call back by someone other than your Financial Advisor or Investment Professional or are communicating via an internet chat line.


Third, ethical Investment Professionals make clear how much you are paying for their services. Some blogs will tell you to make sure you know how your Investment Professional is compensated and will advocate a fee only approach over a commission-based approach or vice versa. Just as important as how much you’re paying or how it’s being paid is what you’re receiving for your money. For example, I believe that paying 2% for a solid plan with benchmarks and tracking is better than paying 1% for investment management without a solid plan. I believe it is also better to pay 2% for a 9% return than to pay 1% for a 5% return.


Investment Professional’s compensation is relevant mainly as it pertains to your goals and their achievement. Investment Professionals should be willing to be completely transparent with regard to their compensation. After all, we believe your relationship should be based on mutual trust and openness, making transparency about compensation paramount.

Consider the differences between Independent vs. Captive Investment Professionals

Captive Investment Professionals:

• Know their captive products in and out because there tends to be a limited scope of products they are allowed to sell.

• Usually are with well-established companies.

• Often with these firms, they operate on a much larger scale, supervising and reviewing transactions on a suitability-based risk matrix.

• These firms tend to provide their investment professionals with large amounts of proprietary education and research, for their sponsored investment products.

• In some instances, they may only use certain financial products, as is sometimes the case with a larger company.

• As with all financial firms, higher volumes can create longer processing times, but particularly during times of market turmoil in firms with limited product offerings and large client bases.


Independent Investment Professionals:

• May have access to more products.

• An individualized, hands on approach to investing.

• Because independent Investment Professionals  have access to a large variety of 3rd party education, research, and R&D they are able to customize research to your specific situation.

• Are often employed through smaller companies, not around for 100 years like some captives, but are able to provide personalized and prompt service to customers.

This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. The views of this material are those solely of the author and do not necessarily represent the views of their affiliates.

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