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In Search of the Right Financial Advisor

Small Business Finances �Rich Best
Rich BestRich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.

In Search of the Right Financial Advisor

In Search of the Right Financial Advisor

Unquestionably, investors have enjoyed one of the longest bull markets in our history. It has been a great time to invest and, if history is any indication (though past performance is no guarantee of future results), it still is. While bull markets don’t last forever, no one is in a position to know with any degree of certainty when it will end. But here is what we do know: when the next bear market comes, another bull market will follow. 1

However, whether we are in a bull or bear market, the larger risk is attempting to go it alone. It’s in times like these, when uncertainty begins to creep into our psyche, that a good financial advisor is most valuable. No one has a crystal ball that will tell us when the next bear market will begin. But a good financial advisor - especially one who has experienced big market declines, such as what occurred in 2008 - knows how to arrange an investment portfolio in such a way to capture returns in a bull market, while minimizing volatility and losses in a bear market based on your risk profile.

The challenge for investors is choosing the right financial advisor for their needs, preferences, and circumstances. There may be hundreds or even thousands of advisors to choose from in your area. Taking a moment to understand what you need and want from an advisor can help you narrow the search.

What Exactly Do You Want from a Financial Advisor?

When it comes to financial advice, the value you receive has more to do with whether the advisor can meet or exceed your expectations, and less to do with fees and investment performance. However, unless you know precisely what you want from an advisory relationship, fulfilled expectations may not hold much value.

  • Do you want more transparency in your transactions? Then you will need to know how the
  • advisor is compensated and whether any other party shares in that compensation. Has the advisor explained the cost structure of the advice you receive and the investments you make?
  • Do you want nothing less than unbiased, conflict-free advice? Then you will need to know if the advice you are receiving is linked to the sale of a particular investment product. You need to know that the advisor will disclose to you any potential conflict of interest, including his relationships with any party that could interfere with his ability to put your interests first in all matters.
  • Do you want truly authentic advice? Then it’s important to know if the advice you receive is grounded in sound planning principles. Has the advisor received advanced education in financial and investment planning or is he trained in investment sales? Check his credentials and ask him about his commitment to ongoing education.
  • Do you want assurance that your interests will always come before the advisor’s interests? Then you need to know that the advisor is legally bound to serve in a fiduciary capacity. If he says he is, ask for written evidence he is governed by a fiduciary standard of care. If the advisor says he is bound by fiduciary duty, yet he also sells financial products for commissions, be sure to get in writing a commitment to fully disclose all conflicts of interest in those transactions.
  • Do you want a more holistic approach to your investment plan? Then you will need to know if the advisor has the expertise and access to resources in the complete range of planning disciplines, including tax, estate, business and retirement planning. Does he collaborate with other experts or does he rely on his own capacity to address these issues?

The more you understand what you want in an advisory relationship, the more prepared you can be with the right questions. A good advisor understands your questions are important to you so you shouldn’t feel as if you need to hurry through them.

As you become more educated on what constitutes sound advice, and more aware of what you are actually receiving, you can look past the irrelevant titles and ignore the mass marketing to make a rational determination of what a quality advisor looks like.

1FTPortfolios.com. History of U.S. Bear and Bull Markets Since 1926. June 28, 2019

https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d


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