December 12, 2005
COMMENTARY: Picking a winner | How to choose the right financial advisor
By Randall Richard
President, Allegiance Financial Group, Portland
Over the past several years, the financial services landscape has changed dramatically. Gone are the days when a local bank simply made loans and held your savings, insurance agents sold car, home and life insurance, and a CPA prepared tax returns.
Wanting to serve the diverse financial needs of baby boomers and their parents, many professional services firms are converging. Bankers, attorneys, CPAs, insurance agents, stockbrokers and investment advisors are moving away from their role as specialists and instead are becoming "one-stop financial planners."
Add to this trend the abundance of do-it-yourself financial publications, and the financial landscape is more confusing than ever. Should you venture into the financial planning world on your own, or is it prudent to partner with an advisor? While neither strategy is right or wrong, the reality is that most people simply don't have the time, interest or experience to go it alone.
I'll leave the do-it-yourself financial planning advice to the volumes already written on the subject. If, however, the idea of having a financial advisor working on your behalf is appealing, consider these points before making your selection:
Look in the mirror.Who are you? What is your personality type? Do you make decisions based on "feel"? Or do you have the numerical logic of an engineer, and enjoy research, tables and comparisons? Your answers should influence your choice of financial advisor.
While there are a number of reputable financial advisors ˆ and the importance of bottom-line performance and integrity should be a given ˆ it is important to choose one with an approach that fits your style. If you expect to get guidance, but are presented only with facts and figures, you are bound to be unhappy.
Identify short-term vs. long-term goals. List the financial issues you face, then break them down into segments: short-term (one to three years, such as making a job change); intermediate (three to seven years, such as buying investment property); and long-term (seven to 15 years, such as funding college or retirement).
When meeting with a potential advisor, don't limit yourself by asking specific questions such as, "What do you think of the XYZ fund?" Focus instead on discussing your goals, and let the advisor advise. Most initial consultations are free, so use them to your advantage.
Gather your personal information. In anticipation of the initial consult, assemble your personal information, such as taxes, bank statements, insurance policies and retirement plan statements. Bring a summary of this information to your preliminary meeting.
Create a short list. Begin by establishing a list of six to 10 potential financial advisors. Ask for references from people you trust who appear to have their financial matters in order; review local publications; look in the local Yellow Pages. Visit the websites of these firms. What are each company's major strengths? Based on the info you find, narrow your list to three firms.
The advisor should have substantial experience in the areas you seek, as well as appropriate credentials and licensure (where applicable). Competence, integrity and trust should be at the top of your qualifications list. For more information about brokers and investment advisors, visit the Securities and Exchange Commission's website at www.sec.gov and click on "Investor Information."
Set up the initial meeting. Arrange an initial consult with each financial services firm on your short list. Though some advisors may offer to come to your home, don't bite. Visiting their environment provides you with valuable insight: Is the office organized? How does the receptionist treat you?
Look for signs that the firm is professional, accessible and customer-focused. Is it in sync with the image presented on its website?
Make sure that all decision makers (e.g., your spouse or your parent) are present at your first meeting, so they can also provide input.
Ask the right questions. Come to your meeting with an organized list of questions, such as:
ˆ Is the person you're meeting the one you'll be working with? You may meet the principal of the firm, but accounts are often managed by someone else. Though not necessarily a drawback, this is information you'll want to know up front.
ˆ Define the breadth of financial products and services. Does the firm have access to national securities markets and other investment resources?
ˆ Does the company have any areas of expertise? What is its core business? You want to ensure that its specialty matches up with your goals.
ˆ How will the firm work with your other advisors, such as lawyers and accountants?
ˆ What can you expect as a new client during the first six months? As an existing client?
How often will you meet, and how often will you receive account reporting?
ˆ What is the firm's pricing and fee structure? Is it commission-based, fee-based or a flexible mix? Choose a structure that is comfortable for you. The lowest price is not always the best.
Listen. Understand that you've come to an advisor because you seek financial insight. Ask a lot of questions, and make sure the advisor takes the time to answer them to your satisfaction. Most of all, listen to each representative's unique approach and plans.
In the end, you'll see that managing your finances is not unlike managing a business.
Surround yourself with a qualified executive management team to help reach and exceed your personal financial goals, and you will succeed.
Over the past several years, the financial services landscape has changed dramatically. Gone are the days when a local bank simply made loans and held your savings, insurance agents sold car, home and life insurance, and a CPA prepared tax returns.
Wanting to serve the diverse financial needs of baby boomers and their parents, many professional services firms are converging. Bankers, attorneys, CPAs, insurance agents, stockbrokers and investment advisors are moving away from their role as specialists and instead are becoming "one-stop financial planners."
Add to this trend the abundance of do-it-yourself financial publications, and the financial landscape is more confusing than ever. Should you venture into the financial planning world on your own, or is it prudent to partner with an advisor? While neither strategy is right or wrong, the reality is that most people simply don't have the time, interest or experience to go it alone.
I'll leave the do-it-yourself financial planning advice to the volumes already written on the subject. If, however, the idea of having a financial advisor working on your behalf is appealing, consider these points before making your selection:
Look in the mirror.Who are you? What is your personality type? Do you make decisions based on "feel"? Or do you have the numerical logic of an engineer, and enjoy research, tables and comparisons? Your answers should influence your choice of financial advisor.
While there are a number of reputable financial advisors ˆ and the importance of bottom-line performance and integrity should be a given ˆ it is important to choose one with an approach that fits your style. If you expect to get guidance, but are presented only with facts and figures, you are bound to be unhappy.
Identify short-term vs. long-term goals. List the financial issues you face, then break them down into segments: short-term (one to three years, such as making a job change); intermediate (three to seven years, such as buying investment property); and long-term (seven to 15 years, such as funding college or retirement).
When meeting with a potential advisor, don't limit yourself by asking specific questions such as, "What do you think of the XYZ fund?" Focus instead on discussing your goals, and let the advisor advise. Most initial consultations are free, so use them to your advantage.
Gather your personal information. In anticipation of the initial consult, assemble your personal information, such as taxes, bank statements, insurance policies and retirement plan statements. Bring a summary of this information to your preliminary meeting.
Create a short list. Begin by establishing a list of six to 10 potential financial advisors. Ask for references from people you trust who appear to have their financial matters in order; review local publications; look in the local Yellow Pages. Visit the websites of these firms. What are each company's major strengths? Based on the info you find, narrow your list to three firms.
The advisor should have substantial experience in the areas you seek, as well as appropriate credentials and licensure (where applicable). Competence, integrity and trust should be at the top of your qualifications list. For more information about brokers and investment advisors, visit the Securities and Exchange Commission's website at www.sec.gov and click on "Investor Information."
Set up the initial meeting. Arrange an initial consult with each financial services firm on your short list. Though some advisors may offer to come to your home, don't bite. Visiting their environment provides you with valuable insight: Is the office organized? How does the receptionist treat you?
Look for signs that the firm is professional, accessible and customer-focused. Is it in sync with the image presented on its website?
Make sure that all decision makers (e.g., your spouse or your parent) are present at your first meeting, so they can also provide input.
Ask the right questions. Come to your meeting with an organized list of questions, such as:
ˆ Is the person you're meeting the one you'll be working with? You may meet the principal of the firm, but accounts are often managed by someone else. Though not necessarily a drawback, this is information you'll want to know up front.
ˆ Define the breadth of financial products and services. Does the firm have access to national securities markets and other investment resources?
ˆ Does the company have any areas of expertise? What is its core business? You want to ensure that its specialty matches up with your goals.
ˆ How will the firm work with your other advisors, such as lawyers and accountants?
ˆ What can you expect as a new client during the first six months? As an existing client?
How often will you meet, and how often will you receive account reporting?
ˆ What is the firm's pricing and fee structure? Is it commission-based, fee-based or a flexible mix? Choose a structure that is comfortable for you. The lowest price is not always the best.
Listen. Understand that you've come to an advisor because you seek financial insight. Ask a lot of questions, and make sure the advisor takes the time to answer them to your satisfaction. Most of all, listen to each representative's unique approach and plans.
In the end, you'll see that managing your finances is not unlike managing a business.
Surround yourself with a qualified executive management team to help reach and exceed your personal financial goals, and you will succeed.
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