What to Look for When Choosing a Financial Advisor
- It’s Your Money
The first thing to remember about choosing a financial advisor is that YOU are the boss and they work FOR you. You are in charge of your finances and your future. The advisor is there to arm you with enough information to arrive at the best decision for yourself and your situation. That’s not an excuse to act like an entitled jerk to someone who could potentially help you, but never let them tell you what they’re going to do with your money. If you spend weeks researching the ins and outs of your next vacation, you should probably invest a similar amount of time with your money.
- They Need to be a Teacher
Heads of countries have a variety of advisors and experts around them that help guide decisions. Hopefully the leader has enough common sense to know what they don’t know and surround themselves with smart people who can educate them when necessary. Same with financial advisors. Good advisors feel uncomfortable when clients throw the ball in their court and say things like: ‘over to you man, just make me some money!’ If a client isn’t willing to learn about the basics of investing, when the inevitable downturn arrives it becomes the advisor’s fault that the cruise ship company stock fell during the next pandemic (“my guy lost all my money!”) A good rule of thumb is that if you can’t explain your investing to a 12 year old, it’s too complicated for you right now.
- How do They Get Paid?
Good advisors are providing a valuable service and should get paid for it. There are different compensation structures for different firms and they should be up front and willing to explain how they get paid (but no, you don’t need to know how much they took home last year.) Just because someone gets a commission for selling a certain financial product doesn’t necessarily mean it’s a bad deal, but they should be able to show comparable offerings from other providers and how theirs’ stack up.
- The Ick Factor and Red Flags
Personal security expert Gavin DeBecker says that intuition is knowing something in the moment without knowing why. It might just be you need more education to feel better about a decision and a good advisor will have no problem breaking a topic down to a level of your understanding.
Some things to watch out for:
- Being evasive when asked how they get paid.
- Not being willing to teach you the basics of investing.
- Using fear, greed and ego as sales tactics.
- Pitting one spouse against the other.
- Pushing you to sign things without reading them.
- Becoming upset when you say you want to think about it.
- They mention life insurance and investing together.
- They say anything about borrowing to invest (including HELOCs)
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