The following is a guest post. To learn more about guest posting on iHeartBudgets, please contact me.
AverageJoe was a financial advisor to about 150 families for over 15 years and managed around $60M. Now he writes at the creatively named “Average Joe’s Money Blog” and is co-host of the Two Guys & Your Money podcast. Check out his show on iTunes.
What to Expect in a Financial Advisor
Uncle Joe’s Story Hour:
Mary had always wanted a financial advisor. It sounded great….working with a pro. She told me six months ago her story:
“I imagined someone who would kind of hold my hand and walk me through the tricks I didn’t know. It was exciting.”
After she found a guy in the phone book, she gathered her credit card statements, student loan information and 401k stuff for the meeting.
When she arrived, she couldn’t have been more disappointed. The “advisor” only wanted to talk about how much she had saved and how much insurance she had. When she asked about her credit cards, he told her that if she saved more money and hid it better the debt would take care of itself. When she asked too many questions, the advisor told her that he couldn’t give her more information without her first paying a fee.
It’s been three years and Mary still has credit card debt, still has budget problems, and sadly, no real insurances or savings plan.
It doesn’t have to be that way.
The good news is that there are advisors out there who take care of the big picture. Sadly, you won’t be able to find them just by searching for a few letters like CFP or ChFC (two common accreditations among financial advisors). Here are some things that I recommend when hunting for an advisor who’ll help you toward your goals:
1) Look for someone who wants to solve your problems, not their own. Mary’s “advisor” wanted to know how much she had saved and her insurance situation because he makes money by managing assets and selling insurance products. He’s so busy focusing on his own paycheck that he hasn’t thought at all about how to best communicate with Mary or solve her problem.
This approach reminds me of the old Ameritrade commercial where an older guy is sitting with a young advisor. The advisor says, “I’m thinking villa in Tuscany.” The older guy leans forward and says, “Yes!” The advisor continues, “I’m imagining a brand new boat.” The older guy gets excited. “Yes!” The advisor exclaims, “I’m thinking retirement at age 50!” The older guy’s face contorts, “But I’m 54!?” The advisor looks across the desk and says, “…oh, we were talking about you?”
2) Find advisors via referrals, not the phone book. Great advisors don’t advertise much. You know why? They don’t have to. If you’re looking for a resource via advertising channels you’re either going to get the new advisor who’s just starting out (ready to be a guinea pig?) or one who can’t keep a stream of referral clients coming through the door.
The only times I advertised in my career was when a client wanted something to help their local cause. If my client’s kid was in a play, I’d buy an ad. I didn’t care about a return on investment….I wanted to invest in my relationship with that family.
3) Interview advisors who listen, not talk. I had some “friends” in the business who were so sure they knew everything that they never really addressed the client’s true problem. Only advisors who actually listen to you can solve your problem.
If I didn’t have a specific reason to meet with a client, a general meeting would start with a few questions on my part. “What are your biggest concerns right now? When you leave here, what do you want to most know? Anything important happen in your financial life since we last met?” Only once I heard the answer to those questions could I begin to diagnose any issues they might have.
Some of my clients never wanted to look at their overall plan. Others would have lived at my office if I’d let them. Find out how often your potential advisor will meet with you and what the price is for this contact. If it feels like the advisor wants to meet more often than you’d like, ask what will happen at the meetings. You might be surprised to find that a good advisor has an agenda full of ways to make or save you money that you didn’t expect.
With technology advancements, a face-to-face meeting, while nice, isn’t always necessary. I began using telephone conferences, WebEx meetings and email exchanges to have more frequent “touches” with each of my clients and meet any financial issues head-on.
Your #1 Goal
Simply put, you need to be comfortable. If this person is going to be your coach or advisor, you’re going to have to enjoy meeting with him/her and be excited about accepting calls from them. If something feels off about the person at all, don’t hire the advisor! Sure, they might know a ton about money, but if you don’t fit well, you’ll waste money because you won’t take their advice, no matter how savvy it might be.
iHB Thoughts: Joe, these points are spot on! It reminds me of how Dave Ramsey always talks about looking for a professional who has the “heart of a teacher”. My advisor is low touch, but keeps me informed, which I like. Honestly, I could probably do some shopping around and be a bit more involved, but all I have is a Roth IRA which I haven’t contributed to in a few years (I know, I know, bad Jacob!) But I love the idea of looking for someone who can help your whole financial picture, not just pad their wallet by selling you products.
If you were hiring an advisor, what would you look for? I’ve left out some of the obvious things you read (experience, credentials, etc.). Feel free to fill in the blanks in the comments: