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Five Signs of a good Financial Advisor*
Sign #1: A good Financial Advisor takes the time to explain things to you. - While some people don’t want to be bothered with details, most investors do want a certain level of knowledge when it comes to their investments and financial plan. People get frustrated when they feel they weren’t given key information about things that affect them or when they are made to feel awkward or intimidated about asking questions.
- A good financial advisor will quickly put you at ease and make you feel welcome to ask any questions that will help you understand the key issues. This is an important first sign of a good advisor.
Sign #2: A good Financial Advisor puts your financial interests before his.- It basically comes down to whether an advisor is willing to offer you advice that will not make them more money. In the case of investing, an investment advisor might recommend leaving a significant amount of cash in a savings account rather than putting it into investments if you have a major purchase coming up. An insurance advisor might recommend a lesser amount of insurance than you asked about. A financial lender might recommend that you borrow less money than you are actually qualified for.
- These are sure signs of an advisor who is putting your financial interests before theirs or their company’s.
Sign #3: A good Financial Advisor offers you a full range of financial products. - You will want to have an advisor who can offer you more than just the standard fare of mutual funds or segregated funds – especially if they are all from the same company which he represents. If you have a significant amount to invest, you will want to be with an advisor who can offer you ETFs - exchange-traded funds, and the full spectrum of equities, bonds and preferred shares. When it comes to insurance, you want an advisor who has access to many different insurance companies, not just one.
- The greater your choices, the better your chances of getting the best outcomes.
Sign #4: A good Financial Advisor can deal with a broad range of financial needs. - It’s not just a matter of offering you the right investment advice, as important as that is. A good financial advisor will also have the needed expertise to advise you in all the other areas of financial planning including, retirement planning, registered saving plans, saving for the children’s education, tax planning, estate planning, and the full spectrum of insurance coverage.
Sign #5: A good Financial Advisor is committed to prudence and financial discipline and will at times disagree with you.- If you are paying a professional for their financial expertise, then you should expect on occasion to be challenged in your opinion. An advisor who is simply an “order taker” is not providing advice. If your advisor agrees with every suggestion you make, then you should simply be managing your own financial affairs.
- A good advisor will moderate your excitement in the good times and will keep you from drastic moves in the bad times. They will not be afraid to tell you what they think you should do, and will always remind you of your bigger goals and help to you stick with the long-term plan.
A word about performance:
Some of the best advisors can suffer from poor investment performance over the short term, and some of the worst can look very good at times. A good financial advisor is one to keep for the long term regardless of short-term investment performance. If they fit within the five criteria above, then over the long term, they will almost assuredly lead you to a better financial future.
If you can’t see your current financial advisor in most of the five scenarios on this list, then it is time to start looking for a better one. They do exist.
* This article is based on an excellent column recently posted in the Globe Investor (July 9 2010). The column was written by Financial Advisor Ted Rechtshaffen, president and CEO of TriDelta Financial Partners, Toronto. It is Part 11 in the “Advisor Secrets” series that looks inside the financial services industry at what advisors tell their clients and - more importantly - what they don't.
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yourCFO Advisory Group Inc.
yourCFO Ottawa is a branch of yourCFO Advisory Group Inc., a national, independent, full-service Investment Dealer and Financial Planning Service provider. yourCFO Advisory Group employs a dedicated team of professional consultants with a wealth of experience assisting Canadians with all their Financial Planning, Investment and Wealth Management needs.
We invite you to visit our website on a regular basis for newly posted articles on various aspects of financial planning and investing, and Jim's Blog for a weekly market review specifically written for busy people. Articles on our site will include such topics as: How to choose a advisor? Questions to ask and what to expect. Also covered will be all aspects of Retirement planning, Tax Planning, Estate Planning, Investing in Equities, Bonds and other investment instruments, and various aspects of Insurance, including Term Insurance, Universal Life Insurance, Disability Insurance, Critical Illness Insurance, and Group Insurance.
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