I have always found it odd that many financial companies and their advisors prominently display on their websites an article on how to select a financial advisor.  Seems just a little biased.  As I read a number of them, it was highly coincidental that the qualities they thought you should want in an advisor were the ones they happened to possess.  Instead of mimicking a behavior I find disingenuous, I will just let you know those items I watched out for back when I looked for help.

First and foremost, do your own due diligence on the person/firm.  Referrals are great but they are only a single piece to the puzzle.  Build a mosaic of the person through a combination of factors.  These are some that I think important;

  • Look up the advisor on FINRA’s BrokerCheck database.  This database is run by the regulating body responsible for brokers and combines with the SEC’s database for investment advisors.  You will gain some information about the licenses they hold, states they are registered to operate in, and if they were parties to any disagreements with clients.
  • Gimmicks annoy me.  It was burned into my mind at a very young age that if something sounds too good to be true, it typically is.  If the advisor’s website address is something similar to “retireyoung.com” or “growyourcapital.com” or “risklessopportunities.us”, it may suggest that he has spent more time buying website names than analyzing asset values and  your financial needs.
  • Work ethic.  Does he spend more time playing than working?  I understand the work smart not hard motto but I still haven’t figured out how to do it within a couple hours a day with the remainder of the time spent on the golf course.  Maybe I’m not as bright as I thought…  To me, investing wisely and with discipline is tough.  There are over 5,000 public companies in the US, as many mutual funds, bonds, international investments, etc.  On top of that, there are economics drivers at play worldwide and geopolitical events that need to be monitored.  If he has figured out a way to comfortably analyze all of that while on the golf course, he shouldn’t need to be managing your money.
  • Personal priorities.  This is a difficult one as it is never easy to walk in someone else’s shoes.  With that said, I believe it is important that you find someone that can match as well as possible the values and priorities you have.  This is a business of advising individuals and families on their future, watching out for and protecting against expected, as well as, unexpected challenges.  As I mentioned above, the job is a tough one, I don’t think you want to make it more challenging by having to hope he can foresee your needs if his are drastically different from yours.
  • Is he working harder for his retirement than he is for yours?  I liken this to my experiences with auto mechanics.  We have all had the one that scared you into doing things that, in hindsight, may not have been needed.  Conversely, I have found the dream mechanic (I’m happy to share his name if you live in the Boston area) in a man that lays out the varying levels of maintenance; those items that need to be done, those that should be done, and those that he would do if it was his car.  Same goes for financial planning and you want to beware of the guy that scares you into products.

This is not meant to be an exhaustive list as it is obvious I haven’t mentioned anything about past performance (which will be covered in a later article).  This is meant to focus much more on the one overriding factor that I find important in an advisor (be it financial, legal, auto, etc):  Can you trust them to do right by you?