You Should Love Your Financial Advisor (or find a new one)

This article was originally published by Lorri DeFoor at Sustain Financial Inc.

Look.

We know financial advisors don’t have a great reputation.

We got into the financial advice industry to be disruptors of what we consider, at worst, unethical financial advising practices, and more often just apathetic and uninspiring ones.

We know this, but it still disappoints us every time we hear someone refer to their financial advisor as someone they don’t trust, aren’t happy with, or just a person who takes a lot of their money but isn’t really doing much for their financial situation.

Whenever we hear a blasé review of a person’s current financial advisor, we just want to say “Stop! You pay financial advisors a lot of money to provide a service to you, a service related to an extraordinarily important component of your whole life. You need to go find yourself a financial advisor that you love.”

Yes. Love!

There is someone better out there for you. And, in exactly the same way you would nudge a friend to break it off with a significant other after they complained about them for the zillionth time, we want to nudge you to go find yourself a better financial advisor. If someone gave you a terrible haircut, we’re hoping you wouldn’t go back for round two. So why is it so normal to stick with a financial advisor who is not living up to your expectations?

The only thing we dislike less than hearing that a dissatisfied client of an advisor is staying with them, is an advisor who fondly refers to the blessing of inertia in our industry. As in, “it’s just such a blessing that unhappy clients stick around because they’re too intimidated by or can’t be bothered with the process of moving their money to another financial advisor.”

(Yes, you heard that right. They are self-aware and they’re not even ashamed to talk about it with other financial advisors.)

This rhetoric is surprisingly common behind closed doors at financial advisory firms and conferences. At companies that prioritize the addition of new clients or new accounts at an unsustainable pace, reliance on client inertia leads to waning services after clients initially onboard because it’s more important to add new clients than to keep the existing ones happy (since they are, after all, likely to stay whether they are happy or not). And it’s a ridiculous thing for any advisor to be proud of or thankful for, and yet we hear it so often.

With talk like that, it’s no wonder people have such a hard time trusting financial advisors, seeing their value, or believing they could ever find a financial advisor that they love.

And while it may be some work to find yourself a new financial advisor, it may not be as hard as you think. Typically, the hardest part for you will be finding people to interview, taking the time to talk to them, to assess their practice/processes, and decide whether they’re a good fit for you. So many people get intimidated by the prospect of moving their accounts and doing a bunch of paperwork, but in reality, a good financial advisor is likely going to make that part of the process pretty easy (and if you’re a DIY investor not wanting to move accounts at all, in this day and age, it’s also quite possible to work with an advisor who can just advise you on what to do with the accounts you have, with no transfer or takeover of assets required.)

What are some signs you might be ready for a new financial advisor?

 Beyond just outright complaining, here are some other questions to consider when assessing your current relationship with your financial advisor:

 

  • Do you consider this person a trusted financial ally for ALL of your financial questions? Would you, for example, reach out to them if you had to unexpectedly make a big purchase, or were having some trouble figuring out how to best manage your budget, or considering making a significant job change. A good financial advisor should be your go-to for all financial questions, not just questions about your investments.
  • Do you look at the fees they charge you each month or quarter and think to yourself, this person is absolutely worth what I pay them? You should. Period. Financial advisors have a lot of value to offer if they are educated, proactive, and involved in your situation. If you’re paying hundreds or thousands of dollars a month to someone, you shouldn’t have any doubt that they are worth what you pay them.
  • Do you trust the advice they give you? We’ll talk about fiduciaries a little bit farther down, but a good financial advisor should give you options and financial advice that are in your best interest, always – we refer to this as the 100% fiduciary standard. And although studies show that 50-65% of Americans believe their financial advisor is a fiduciary, in reality, only about 11% of financial advisors work in a 100% fiduciary capacity.

 

Where should you look for a new financial advisor?

 There are fortunately good resources for finding financial advisors out there, but it’s never a bad idea to start with folks you know and trust, and to ask for recommendations. But be thoughtful about who and how you ask, and how you interpret the responses.

Good financial advisors tend to specialize in the types of work they do, so the best financial advisor for your parents might not be the best financial advisor for you. Asking people whose financial and life situations are similar to yours makes it more likely that the recommendation will be a good fit for you. And try to make it clear when you ask, you don’t just want to know if someone knows of a financial advisor, you want to know if they have a finncial advisor that they love.

 

That being said, we’d also highly recommend that you do some independent research of all the options out there. These two sites are a great place to start, and all members of WWFAN are part of at least one of these organizations!

 

 

Both of the sites above vet their advisors for:

  • Education – advisors have to have completed the Certified Financial Planner™ (CFP®) certification, which is the minimum level of planning education you should be looking for in a financial professional.
  • Fee-Only – advisors can’t make commissions on sales of mutual funds or insurance products. (Note that ‘fee-only’ is distinctly different from ‘fee-based,’ and ‘fee-only’ is what you want)
  • 100% Fiduciary – advisors must act in their clients’ best interest 100% of the time. (Similar to the language around fee-only vs. fee-based, advisors can claim to be a fiduciary even if they only have to act as one some of the time, so it’s important that you ask your financial advisor if they are required to act as a fiduciary 100% of the time), or use one of the sites above as a way to screen for that before you start interviewing.

 

How many people should you talk to before making my decision?

As many as it takes to find a financial advisor that you are enthusiastic about working with. But typically, we’d recommend chatting with at least three financial advisors so you can see what the options are like and the range of services available.

It’s a little bit like buying a house though. You might know very quickly that you’ve found a great fit for you, or it may take months of looking at what’s out there to find just the right fit. So, there’s no rule that says you need to stop interviewing after three, nor is there anything saying that the first person you talk to won’t be a great fit (though even if they are, what’s the harm in talking to a couple more?)

 What should you look for in a potential financial advisor?

 The three key components mentioned above – 100% fiduciary, fee-only, and some level of education that shows an interest in proactive financial planning (preferably a CFP® certification), are essential. But in addition to these, take the following under consideration:

Fit – personality, trust, expertise. You want a financial advisor you feel like you can connect with, be honest with, and trust. Fit is critical to a successful working relationship. Beyond just a connection, look for someone who specializes in working with folks who are similar to you in terms of career stage and even industry. They’ll have far more to offer in terms of proactive financial advice for your situation.

Business Model – It’s also important to consider the environment under which advisors work. we’ve met good financial advisors who work for major brokerages, but the reality can’t be ignored that the bigger the firm (like running ads on Superbowl Sunday big), the more likely the advisors’ top priority, whether they want it to be or not, will be adding as many new, big clients as they can. The problem with that is that even a good financial advisor has to put their focus somewhere, and if the focus is always on more and new, it’s unlikely that your financial situation will get the sustained, continued, and long-term attention that it deserves. I actually think great, underutilized questions to ask a financial advisor are: “Do you limit the number of new clients you take on?” and, “Does your firm expect that you add more clients constantly?

Background Check – Did you know you can background check any financial advisor that you talk to? Want to see if someone has filed a complaint, what the verdict of that complaint was, etc? You can use the FINRA Broker Check tool to do that for any financial advisor that you interview. So in a world where it’s important to trust but verify, we also highly recommend doing your homework on the advisor’s history before making the decision to hire.

 Is it better just to do it yourself?

There’s no right or wrong answer to this question, and we’d be highly skeptical of anyone who considers this to be a yes or no question. Financial advice is a service, just like any other. And for some people, it makes sense to pay for that service, while for others, it makes sense to do it themselves. And for some, there will even be times in life that it may make sense to have a financial advisor, and other times where they are perfectly comfortable and capable of going it alone. The truth is that any one of those choices is not universally better than the other.

Think about this like paying for car or home repairs or maintenance. There are multiple factors to consider when deciding if you want to work on your own vehicle or remodel your own kitchen.

 

  • Do you have the expertise to do this?
  • If not, do you have the time and willingness to learn how to do this?
  • If you do have the expertise, is this the way you want to spend your time and energy?

 

This is no different than assessing whether you want to pay someone to do your taxes, work on your vehicle, cut your hair, or clean your house. But we’d have the same advice for you in those situations as we did in this one. If you’re going to pay someone for a service, don’t settle for something that’s unsatisfactory.

Take a moment to think about someone you hire that you are truly thankful for, someone you enthusiastically recommend to your friends and/or family, someone you feel is well worth the money you pay them. Now imagine that you could feel that way about your financial advisor. Imagine you hop off a call with your advisor and feel a sense of peace and clarity about your finances. Imagine bursting with excitement about your financial advisor and wishing you could immediately tell your friends or family what a great experience you’ve just had.

Is it possible? Yes. It is possible to love your financial advisor, and you should, because you are investing your hard-earned money to hire one!

So, if you are going to work with a financial advisor, take the time to find one you can be enthusiastic about, and don’t be afraid to change if you are not.

 

 

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Contact us today to get started on the process. If you have any questions we will be more than happy to advise.

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