Selecting Your Financial Advisor

If you need "warm fuzzy" from your financial advisor on a regular basis, buy a teddy bear. What most investors really need is a well-qualified financial professional to guide them through the financial mine field. Interviewing this professional begins like any other hiring process, you review their qualifications, philosophy, training etc. Remember, you are going to trust this person with all the intimate details of your financial life. The first step in this process falls to you, the investor. Prior to hiring a financial guru you should establish a "guru job description" which outlines your expectations. For example, you may believe that protection of your assets is most important, or increasing portfolio value may be equal importance while tax strategies are of minor concern. In other words, spell out your personal objectives for the advisor you are going to hire.

You should ask for a resume from a potential advisor. This resume should detail their work experience, financial/investment training, academic education, credentials, licenses and certifications. House painting, bar tending or being a real estate brokerage are honorable professions, but they do not qualify a person to be a financial advisor. If the advisor declines to provide you with this information there is probably a reason, and the chances are you would not like it, so terminate the interview.

Once you start the interview process here are some questions that should be asked and answered: What procedure do you use to document and understand my needs and objectives? What is your investment philosophy? What insurance products (life insurance, annuities or long term care) do you sell and how often do you sell them? Do you recommend individual stocks and bonds or do you most often recommend mutual funds. If the advisor recommends a lot of mutual funds or adheres strictly to his company’s stock recommendation then he/she is probably not a financial advisor but rather a securities salesman. Ask the advisor how he/she is paid and how much for each specific product (ask for written examples).

Prior to terminating the interview here are some revealing questions that may assist in you in making your final decision. "How well have you done with your own portfolio and will you show it to me?" If he/she declines its probably because they haven’t done well using their own advice. Another indication as to the advisor's motive is, do they have their home phone number on their business card? (if not, then communication will be one way – from them to you). Ask for an example of some past successes and failures and for an explanation as to what happened. Ask what method he/she uses to analyze stocks and bonds (technical or fundamental). What asset allocation procedure is used? Does your advisor have a financial calculator, and if so what do they use it for? (if they have one and don’t use it, they are selling, not advising). Lastly, inquire as to the amount of assets they have under management, the greater the number, the less attention you will receive.

At a minimum the ideal advisor should probably have the following credentials: At least 10 – 15 years of financial/investment experience, a college degree in a related field: (business, finance, accounting or law), formal training in securities, investment products, insurance and estate planning, should have passed the series 7 “general securities exam”, have certifications such as Certified Financial Planner © or Charter Financial Analyst. Attorneys, CPAs, and bankers should be members of your financial team but not be the primary source of financial information.