Tips for Finding the Right Investment Advisor Part 2

Markets got you down? Now may be a good time to team up with a good investment advisor - Part 2

Andrew Horowitz
5-minute read
Episode #80

Experience Gets You Better Advice

Expert financial advice is a lot like major league pitching: experience plays a huge role. A rookie is far less likely to construct a time-tested and watertight plan for you than a seasoned veteran. As a rule of thumb, you should seek out an advisor that has at least five years of service under his or her belt.

Independent Advisors Give You Better Options

Independent advisors are also better equipped to meet your needs than those who are associated with a big insurance or brokerage firm. This is because advisors who work for one of the big names on Wall Street may be required by the company to sell you many of the products that their company markets.

These are usually termed “proprietary.” For example, if the brokerage firm your advisor works with is Worthmore Investments and the fund she recommends is the Worthmore Stock Fund, start asking questions. Is there a financial incentive or bonus for the recommendation of this investment? How does it stack up against its peers? Are the fees competitive? What are the other options and why are they not being presented?

What if there is a cheaper financial product offered by a competing firm, but you have been pigeon-holed into buying the more expensive one from your advisor’s affiliated company? Who is benefiting from this? Basically, an independent advisor is not hindered by a narrow range of products and services. He or she does not try to pound a square peg into a round hole. At some point in the life of many successful advisors, there comes a time when a great deal of the work can be pawned off on an assistant or rookie partner. The trouble with an advisor who spends more time away from the desk than at it is that he or she may often miss investment opportunities that could have served you quite well.

More to Look For in An Investment Advisor

Choose an advisor who spends at least 8 to 10 hours per day directly serving the needs of their clients, rather than wearing the hat of the firm marketer. Unless there is a staff member or partner that you have agreed to work with in advance, your advisor should be the primary contact for your finances.

Of course, for the administrative matters, the advisor may not be needed, so make sure you develop a good relationship with the office administration and staff. Though you may not think so at first, they are a key component to your long-term success.

A state insurance license means that your advisor deals with more than just market investments—it means that they can provide a whole host of value-added services to help you meet many of the needs that will help protect your money. Most effective asset allocation plans include some kind of insurance. Can your advisor provide that for you?

Choosing an investment advisor comes with an awful lot of gut feeling.  If you are not cmfortable in their presence, keep looking.

The final point is the most traditional and the most important. Choosing an advisor, like choosing any product or service, is still essentially a “smell test.” It is still a good practice to ask a friend or get a professional recommendation. The process still comes with an awful lot of gut feeling. You can find an advisor who has the world’s greatest track record behind them, but if you are not comfortable in their presence, keep looking.