The Two Most Important Questions to Answer When Choosing a Financial Advisor

In working with over a hundred prospective clients in the past five and a half years, I’ve found that these are the two most important questions you need to ask yourself:

1. Do I trust this person?
2. Do I want to pay for their services?

I suppose the first one is unsurprising. Trust is the name of the game in this business. You need to be able to believe that the person acting as your individual CFO is trustworthy.

How can you know if an Advisor is trustworthy? Well, the truth is that there’s no way to know this with 100% accuracy. We are all familiar with the stories of stunned clients who couldn’t believe what their Advisor had been up to. Here are a few ways to measure trustworthiness. None of these should be considered in isolation.

• If you have friends who are clients, what do they say?
• What is their client retention rate? One thing to remember is that the retention rate in financial services, in general, is quite high. I would personally recommend you consider looking for something north of 96%.
• Transparency of pricing. Are their costs down on paper, easy to understand, and part of the reporting process?
• Are they a fiduciary?
• Do they have the CFP or equivalent designation? There are all kinds of designations Advisors can get. You need to know that MANY of them require little more than a 3-day course. The CFP designation requires 18-24 months of coursework, the completion of a comprehensive final exam and three years of experience. The coursework, prep classes and designation carry significant expense. And, the designation requires several hours of continuing education every year.
• Does the CFP ensure someone is a trustworthy advisor? No.
• Intuition. Listen to your gut. Do you like them? Do they “feel” trustworthy? And, just to reiterate the point above, this is only one of the important things to pay attention to when you are assessing trustworthiness.

The second question is perhaps less obvious, but one that’s so important. Why? First, because our services aren’t cheap. At the risk of alienating a few prospective clients, hiring an Advisor is an expensive proposition.

Here’s the other thing. I’ve spoken with several people who think they SHOULD pay an Advisor. Perhaps a friend, family member, or co-worker suggested it. Perhaps you’ve been told it’s what people at a certain stage of life or with a particular net worth should do. Maybe you just think it’s the responsible thing to do.

But, before you say yes to working with an Advisor, you need to be sure you WANT to pay for the service an Advisor provides. What I mean in using the word WANT is that you see the value in working with an Advisor and are willing, perhaps glad, to pay for the relationship. It may not make you quite as happy as buying a new pair of shoes, but it should feel a lot better than paying to have your plumbing redone! I’ve seen people hire us solely on the basis of SHOULD, only to realize within the first couple years they don’t actually WANT to pay for the service. This is bad for everyone.

Our best clients are happy to pay us. I don’t know any other way to say it. It’s not that they never question the value they’re getting. They do, at least some of them do some of the time. But, they are thankful for a companion who worries about their money with them and brings ideas and experience to the table. Some actually stop worrying.

There are other questions to ask yourself, but these two are the most important. In making a decision, give yourself the time you need to answer both with clarity. If you’re considering an Advisor, we’d love to talk to you.