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Finding a Financial Advisor:

(This post was originally published on May 25, 2007)

Finding a Financial Advisor

Trust and communication can be two of the toughest elements to create in any relationship. When applied to friendship, love or a business partnership; creating, building and sustaining these two elements can be easy or difficult depending on the people involved.

The reasons many people fail to invest their money properly can be traced back to these two important points. People generally fear what they don’t understand and the stock market can be an intimidating and overwhelming beast for the best of us. There are terms, sophisticated lingo & people in suits who often act as more important than the little people who help to line their pockets. People work hard for their money, so it’s safe to assume that advisors should be careful and cautious when searching out a professional to aide them.

I have always encouraged people to take an active role in the management of their investments. My belief is that although there are a variety of methods, tactics and approaches to investing – the best person to invest your money is you.

That’s because no one else is in your shoes. Your priorities, needs or willingness to assume risk will always be different than anyone else’s. If someone is eager and able to take the time needed to venture into the world of DIY (do-it-yourself) investing, then I feel the advantages largely outweigh any costs in the short run.

Now that is not to say that investment advisors are wrong for everyone. If someone doesn’t have the time, patience or interest in developing an understanding or knowledge of their investing activities – then by all means I encourage people to seek professional help. The vast majority of people will fall into this group strictly because of time constraints in their personal lives and their disinterest/fear of functioning independently.

For a number of years I had a professional advisor who I had manage my investments successfully. Yet there came a time after taking an interest in investing where my education & knowledge surpassed my advisors’. In this case I knew I would benefit greatly from turning to a DIY approach.

If you’re going to look for a financial advisor you want someone who will bring value to your portfolio.  From the experiences of myself and others, I’ve compiled a short list of criteria I feel are important when seeking out a professional to handle your financial affairs:

Generic Products:

An advisor shouldn’t try to offer or treat you with generic products fitting the needs of everyone else who walks into their office. You want to seek out personalized advice that takes into consideration your specific needs, knowledge and expectations for investing. An advisor should consider both your current situation and goals for the future. This can be termed the advisors’ willingness to recognize personal needs. Computer programs with generic questions that generate a investor profile for you to sell mutual fund products that are “funds of fundsor an advisor pressuring a sale upon a customer are things you want to be very weary of.

Description of Ideal Client:

I always encourage people to ask a prospective advisor to describe their ideal client.  You want an advisor to describe to you who they like to deal with, their level of understanding of their clients’ needs and how their personality fits their profession. What you want to avoid are advisors who openly state that they only deal with clients worth a certain amount of money.  You want to ensure that they’re a fit for your personality, occupation, economic situation & investing knowledge.

Education & Qualifications:

You want to ask an advisor what professional associations, certification or credentials they have and are working on. This includes their experience, education, training and level of understanding of all investment securities they offer.


Depending on your individual needs you may want to meet with your advisor quarterly, semi-annually or annually to assess your investment objectives or plan. You want a professional who is willing to make time for you based on that need and that they value your business & portfolio whether its $1,000 or $100,000.

Fee Structure:

It’s important to understand how the advisor is paid in order to properly assess whether your interests are the same as theirs.  Asking them to disclose all trailer fees, commissions or fixed fees are essential. This will also give you an adequate representation of what cost as a percent you’re paying for their investment knowledge and guidance.  It also helps you to identify where a conflict of interest may exist for this advisor.  If they are going to recommend investments that make them the most money; will they be the best investments for you?


This essentially is a SWOT analysis (strengths, weaknesses, opportunities, threats). You want to know what knowledge, expertise or proficiency the professional has across all sectors, industries, investment models and investments. Generally those with a background in economics or business prior to attaining their CFA may have a better understanding of fundamentals than a simple bank advisor.


You want to ask what ethics mean to them. You may want to ask if they’ve ever been investigated or accused of unethical practices or simply compare your own personal ethics with their general practices as a professional.

Favourites vs. Objectivity:

It is also important to determine whether an advisor plays favouritism with specific mutual funds, managers or fund companies in order to determine their level of objectivity. The advisor may receive incentives beyond trailer fees (trips, electronics, etc) as gifts for achieving a certain sales volume of mutual funds or assets under management in a calendar year. You want to ensure that you receive the best advice possible; not just what’s best for the advisor. There’s nothing wrong with holding favourites, but investing without emotion or a conflict of interest are a big warning sign.

Points to remember:

  • The best managers never follow trends, they create their own
  • Understand how fees affect returns over the long-term. An extra 1% in fees each year for 10 years has the potential to eat away 10% of your possible return. Try to keep your average fee structure under 2% on a yearly basis.You want balance in both up & down markets. Chasing returns of last years hot investments will most likely yield lower returns.
  • Past performance can indicate strong success, but can be an even better indication of how volatile (up or down) the investment may be in the future.
  • You want to feel 100% confident in the decisions you make. If you don’t understand the 5 W’s (who, what, where, when & why) then your advisor should provide you with more information when asked.
  • The best never advertise. Why? Because they simply don’t need to. They generate enough business on a referral basis that they don’t need to attract new quality clients through soliciting.
  • An advisor who has the willingness to say NO or disagree with your suggestion of investing in the next “hot” market idea or trend is quite possibly a keeper because they’re concerned with your long-term success and not just their commission today.

Remember to be patient, stay educated and remain objective in your search. Don’t settle for anything less than you deserve and understand it may take 4-5 interviews with various individuals to find the right fit. They’re handling your hard earned money – so you want to take the right amount of time to find the right person.

And remember…

No one will ever handle your money like you will!

{ 1 comment… add one }
  • Before going with a particular advisor do a little research too. You may want to see testimonials and such from previous clients. Although, it is always better to have yourself personally take control of financial matters, if it’s going to be too much for you it will be better to let an expert handle it for you. But always stay informed and try to learn it at your own pace so you can handle your own financial affairs in the future.

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