If you need medical help, you get a doctor. If you need legal help, you get an attorney. If you need financial help, you get a financial advisor. Advisors are just another class of professionals designed to provide you with the service necessary to help you reach your goals.
Of course, you could always become a DIY financial advisor.
However, not all financial advisors are skilled professionals, and you should never settle for sub-par service. Here are the four qualities your financial advisor must have:
Transparency. Yes, your financial advisor is getting paid. Whether it be commission, fee-based or a percentage of assets managed, your advisor is profiting from your business. But what professional isn’t? Your advisor should clearly and openly tell you the costs associated with different plans. Don’t be afraid to ask if he will be getting paid more to sell a particular financial product – just make sure that what he recommends actually matches with your goal.
Teaching ability. Clients get bored and intimidated by financial advisors who pull out numbers, graphs and jargon. Your financial advisor should understand that you don’t care too much about the details of asset allocation as long as your goals are met. You don’t ask for a biology lesson from your doctor, right? If your advisor cannot sit you down and explain concepts in simple terms, it’s time to find a new advisor. A good example of explaining concepts metaphorically is as follows:
Whenever Jim advisor meets with a client and conducts seminars, he uses a ton of jargon and complex statistical data. He outlines indicators of market noise and different ratios analyzing hypothetical portfolio activity. His clients and prospects can’t follow him, and even if they give positive feedback, the chances of them doing business with Jim Advisor are low. When a client asks Jim Advisor to explain risk and to give a recommendation as to how much risk Jim thinks he should take on, Jim pulls out his reports, studies and big words.
Joe Advisor is a great teacher, who can break down complex topics into layman’s terms. He can also explain financial concepts metaphorically. When a client asks Joe Advisor to explain market volatility and how that affects his long-term goals, Joe gives a metaphor. He says something like, “Imagine you are in the market for a car and both of them are the same price. Car 1 is a beautiful sports car that you can drive up to 100 mph towards your destination, but it breaks down frequently, so there will be times you’ll be stuck. Car 2 is a dependable compact car, which will never go as fast, but will hardly ever break down. Which would you prefer?” Obviously Car 1 would be the volatile portfolio.
Specialties. Too many financial advisors are jacks-of-all-trades, but masters of none. Don’t be fooled if an advisor tells you he’s an expert in multiple arenas. Don’t be afraid to spread your business across multiple financial advisors. Sure, they’d love to manage 100% of your assets, but if you are better served by separate specialists, do that. There’s an added bonus if your advisor has a niche market in your demographic. Some advisors focus on lawyers and are well-versed in the lifestyle patterns and needs of lawyers. If you can find an advisor that fits the needs of your demographic, stick with him. This is a priceless advantage.
Client-centered service. To many advisors, this means calling clients once per month, as is the industry norm. To me, this means, “If the client wants to be called once per month, I’ll call once per month”. A stellar advisor will seek out the needs and wants of the client to make sure they are properly served. If the client has kids, the advisor will educate him about 529 plans. If the financial advisor notices a tax break or law change that benefits the client, he will act on it. In order to do this, the advisor must be client-centered. A cookie-cutter approach to financial planning and advising does not work! Plus, going the extra mile doesn’t always mean a ton of extra work. It just means caring about clients and anticipating their problems.
Employing a financial advisor is a great way to ensure you meet your money goals, whether it’s beating market averages or making sure that your wealth is properly distributed during retirement. Just make sure that whoever you choose has these traits.
P.S. If you happen to be a financial advisor (and you have these four superior qualities), you might want to check out these marketing and prospecting ideas.