Simple Steps to Selecting an Advisor

Author William Bernstein once observed that by the time you know enough to select a high-quality financial advisor, you could probably manage your assets on your own.
Sadly, that’s not all that far from the truth. The financial-advice industry features a bewildering array of titles, designations, and compensation schemes. Some advisors are fiduciaries, some aren’t. (I am proud to be in the first category)
Do you need an advisor? What questions should you ask to select the right one? Here’s why asking good questions is important: It helps you uncover the money challenges you’re facing today and generate better solutions to solve those problems.
People skills are important when it comes to getting financial help; financial matters are personal, so you need to have a baseline comfort level with any individual you’re entrusting to help you. It’s important to feel comfortable and have good rapport.
But you also need to conduct a reasonable amount of due diligence before signing on with an investment advisor. I learned this important lesson as an institutional portfolio manager as part of the process of hiring outside investment managers.
The process can be broken down into two simple steps. The first involves taking stock of your needs: What are you really looking for?
The second step is to take what you learn about your own needs and goals to identify an advisor who can help you meet them based on the kind of value they can provide.
Key Questions to Ask Yourself

First: What kind of help are you really looking for?

❋ If you are honest with yourself, how often do you engage in a disciplined, professional review to understand and maximize your money situation? How often do you want to do this?
❋ Are you a delegator who expects to need a fair amount of ongoing help and would also like to be able to be able to contact their advisors with questions or concerns on a regular basis?
❋ Do you have a focused, immediate need (rather than an ongoing need for advice)?
❋ How complex is your situation? Do you need a “specialized” service or advice on one area of concern (selling a business)? Or do you need holistic advice on a wide array of financial topics (investments, legacy planning, taxes)?

Second: What are your biggest financial challenges?

❋ How closely have you examined what you are doing with your money today, and how does that compare with where you want to be?
❋ What money habits (over-spending, over-accumulating, too much cash) do you need to move away from?

Third: What are your biggest financial priorities?

❋ What kind of life do you want to move towards? Who do you want to become with
your money?
❋ Compared to how you would ideally like to handle financial adversity, how resilient are you right now?
❋ Are your financial and investment plan aligned with your values and desires? With your spouse’s values and desires?
❋ How quickly do you adjust when life presents a game-changing financial decision?

Taking an inventory of where you are right now with your money and investments will help you to understand what type of financial planning experience you really want and need.

These questions may be a bit different than what the Google would tell you to ask an advisor. But I am a firm believer an advisor should bring three types of value to every client relationship: Relational (meaning), financial (monetary), and intellectual (process).

First: What is the relational value she brings as your advisor?

  • Does she care about making a strong connection with me?
  • How will she communicate with me? 
  • Is she focused on both my values (meaning) and my valuables (money)?
  • Does she understand my challenges, problems, and specific pain points?
  • Does she provide both education and advice?
  • Will she tell me the truth, even when it is hard to hear?

Second: What is the financial value she brings as your advisor?

  • How will she structure our economic relationship?
  • How will she measure success and what benchmarks and indicators does she utilize to measure this for clients?
  • How is she incentivized to act in my best interest?
  • Is she good at managing my risks (and identifying them) in addition to generating returns?
  • How does she quantify strategies that make a meaningful impact on my financial health and wellbeing?

Third: What is the intellectual value she brings as your advisor?

  • What is her investment philosophy/worldview and how is that reflected in portfolio decisions?
  • Does she use basic portfolio building blocks like low-cost ETFs?
  • Are her financial planning strategies readily understandable?
  • Does she have a process in place for when things change in the world (and in your portfolio)?
  • What does she expect a balanced portfolio to return over the next decade?
  • On the softer side (but no less important) does she approach her job with a healthy dose of humility?
If the idea of asking an advisor these questions makes you nervous, keep in mind that great advisors answer these questions all the time! Remember if you want good answers, they come from asking good questions.
Finally, don’t forget that you’re paying for someone to clarify your financial life, not make it more confusing. How an advisor reacts to your questions will tell you a lot about whether they are the right fit for you.
If you are looking for someone to add these three types of value to your situation I’d love to chat with you. Book a complimentary 30-minute discovery call to have all your questions answered right away.
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