With markets at all time highs and a new President about to take office, good financial advice has never been more important. However, how do you know if your current Advisor is best positioned to guide you? There are lots of Financial Professionals out there and most are able to add some type of value but who wouldn’t want the best advice and value for their money. Why let someone else reap the benefits of having an expert by their side when there is no reason that you couldn’t be working with the best as well, just by knowing what to look for.
Let's start by breaking down this conversation into three parts that can significantly play a role in the quality of advice and limit the possibilities of conflicts of interest. 1) What exactly are the Financial Advisors’ qualifications and what training have they received to provide the services they claim? 2) Does your Advisor work for a large investment firm or are they independent? 3) What’s their actual experience with providing these services?
1) What exactly are the Financial Advisors’ qualifications and what training have they received to provide the services they claim?
Unfortunately, many Financial Advisors now a days are still just middle men that take whatever it is there company is pushing and find people to sell it to with no regard to what the client actually needs. In fact, that is often their primary pitch to clients and prospects. “Work with me because I work for this giant firm that employs lots of really smart people. So, I can just relay that information to you!” Well guess what, most anyone can get access to that research from those really smart people, at those really big firms. The real question is, what do you personally (the Advisor) bring to the table? The best research in the world means nothing if it is not employed for the right situation. That’s why having an Advisor who is qualified to understand and advise on all the areas of someones financial life and how all those parts work together to best meet that specific individuals financial goals, is so important. The gold standard in training and qualifications for someone to be an expert in all areas of someone's financial life as a Financial Advisor, is the CERTIFIED FINANCIAL PLANNER™ certification. Now with that said, someone’s savings and the success of their investments are definitely going to be the biggest part in helping to reach their financial goals. While, the CERTIFIED FINANCIAL PLANNER™ designation provides investment training, it only scratches the surface of the complexities of managing a portfolio well. So, the CFP® professional might help you with the financial planning but then decide to outsource the investment management to someone else. While that can workout alright, you can definitely receive a much better outcome when the CFP® professional doing the financial planning also has the investment expertise to employ the investment strategy that best aligns with your goals. One way that someone can gain that expertise is through the training provided by the Certified Investment Management Analyst® (CIMA®) certification.
2) Does your Advisor work for a large investment firm or is he independent?
Why this is so very important has everything to do with potential conflicts of interest. Even if a Financial Advisor is very well qualified and has lots of experience they are often faced with the conflicts of doing what’s best for their client and what’s best for their employer. Most large firms have their own investment offerings and “sell” their own products. So, naturally the firm wants their Advisors to “push” those over other alternatives that may in fact be the better option. Also, a lot of these firms have sales goals! These goals can often be very granular and tell an Advisor how much they should sell of each type of product such as annuities, etc. Now, there is nothing wrong with setting goals. However, I for one set my goals not as a product of $ sales but as how much can I improve the financial lives of those that put their trust in me. When an Advisor is told that they have certain quotas to meet to keep their job and feed their family, it can be hard to always do what it is right by the client. When a Financial Advisor is actually fully independent, that means they have no products to push and can use any and every solution available in the market place that they believe is solely in the best interest of their clients.
3) What’s their actual experience with providing these services?
Lastly is understanding what their experience actually is in providing these services. This one is pretty straight forward. Although a Financial Advisor has to start somewhere to gain experience, maybe that’s not what you want for your hard earned savings. So, find out how long have they been an Advisor? How long have they been a CFP® professional? What type of clients have they typically worked with? What is their investment philosophy? Do they manage the investments themselves or hire someone? Make sure their experience aligns with all of the areas that could best serve you.
Hopefully this helped provide a little more clarity on what you should be considering when deciding who should be helping you with your financial future. If you have any questions or would be interesting in discussing how we may be able to assist you with making the most out of your financial journey, please reach out to us.