A Time Tested Approach to Financial Advisors

Years ago, I had a brilliant WWII veteran as a client, one of the smartest women I had ever met. She told me that she was so glad that women were finally advisors because it took her almost a decade to find the right advisor when she started looking in the 1950s and I asked her why. Her answer was that her due diligence saved her from many “Bernie Maddoffs” over the years. Her process can be almost a textbook case for how to look for and work with an advisor:

She had said initially the problem was finding an advisor that specifically addressed her needs. Every advisor she talked to spoke about 75% of the time, mostly about how great they were and if she was lucky, she spoke about 25% of the time. They were trying to sell her without even knowing her needs or concerns. She said the first lesson for her when looking for an advisor is to look for someone who talks 25% of the time and spends the rest of the time listening to you, without trying to sell you.

She then started asking about the advisor’s company and the company’s products and services. What she learned was that in some cases, the type of company the advisor was part of dictated their recommendations. For instance, over the years she noticed that if she went to an advisor that worked with an insurance company, their recommendations centered on insurance. If the broker worked for a specific brokerage firm, the investments centered on the investments that company endorsed, not necessarily the best investments for her. She was looking for an advisor that was not tied to only one investment product or service.

She then asked about how exactly the advisor got paid. If they skirted around the question or got upset, she immediately left. She knew they made money from her and she wanted to know exactly how. After several years, she decided to work with a fee-only advisor because she wanted to pay for exactly the service she was asking for, which was financial planning in her case. She got tired of constantly being sold investments, when what she wanted was a financial plan.

Once she found an advisor, she did a background check, even if it was a personal friend. Afterwards, she gathered her list of expectations and went over them with her advisor to make sure they were on the same page. Her expectations were to have a quarterly review of her accounts, a review of her financial plan annually, a call back within 24 hours, and to always have a full explanation of the fees of any investments she was presented along with the reason for the investments.

In turn, she would provider her advisor all of the information and updates to do a proper financial plan. She also owed her advisor reasonable expectations- that the market will have good and bad years but she spoke up when she was uncomfortable about a recommendation. This process for choosing and working with an advisor worked well for her and can work well for you too…

 

More like this:

What’s Your Plan For a Financial Independence Day?

What’s Your Plan For a Financial Independence Day?

I personally think of financial independence as consisting of three different levels: ...
Read More
employees discuss 403b plan

What is a 403(b) Plan?

Like the 401(k), the 403(b) retirement plan is critical to retirement planning and saving for individuals with access to them ...
Read More
How to Change Your W-4 and Increase Your Take-Home Pay

How to Change Your W-4 and Increase Your Take-Home Pay

With a few small changes on your W-4, you can start taking a more proactive approach to managing your finances ...
Read More

Subscribe

Be the first to know when new resources are published.