Choosing the right financial advisor is rarely easy, but let’s begin with the most important point: don’t simply take the first name you run across in the yellow pages, on the internet, or have recommended to you. There are three main criteria to consider.
First, the advisor must be duly and appropriately qualified. There’s no point in going to a chartered accountant whose specialty is business valuations to get financial planning ideas.
Second, be sure the advisor deals primarily with clients like you. There will likely be dissatisfaction all around if you take your modest portfolio to an advisor who normally deals with multi-million dollar accounts, and vice versa.
Third, if you want the most objective advice then stay away from any “financial advisor” who earns commissions from selling anything. Go to insurance agents when you need insurance and mutual fund salespeople when you know for sure you want to invest in funds, but not for overall financial planning advice. And if your “financial planner” ever tries to sell you a tax shelter or a real estate deal, run for the hills.
The best way to choose a financial advisor is to get a recommendation from someone whose judgement you trust, who knows the nature of your portfolio, who is completely familiar with the type of practise the professional being recommended carries on, and who has first-hand knowledge of the professional’s competence, credentials and integrity.
Another consideration that I’ve always felt to be very important is that you should like the person. If you don’t enjoy dealing with someone, for whatever reason, even if it’s just a so-called gut feeling, then move on. You should choose a person with whom you’re comfortable communicating and meeting. Also, stay away from people whom you find intimidating; you have to be able to stand up to an advisor when you feel the need.
Your responsibility in achieving financial stability doesn’t end with the choice of an appropriate advisor. Just as you expect your advisor to be honest and candid with you, you have to be honest and open as well.
For example, you have to honestly tell your advisor what degree of risk you’re able and, more importantly, willing to take. You need to satisfy yourself that the type of information your advisor provides to clients is what you want, and if it isn't, then insist on changes. You should also ensure that investment opportunities are communicated to all clients at the same time. If you find out your advisor plays favourites, move on. Don’t hesitate to press for information on how particular recommendations are arrived at; in this area there’s no such thing as a stupid question but there are often astoundingly stupid answers.
A good advisor will be willing to take the time necessary to tailor a financial plan that fits your individual needs (never accept a one-size-fits-all model) but it’s incumbent on you to make decisions. Always hesitating to act on recommendations will work against you.
The most important thing to remember at all times is that it’s your money.