Who are you Supposed to Trust to Manage your Money?

As you are making a decision to entrust your assets with a firm, it’s paramount that you feel comfortable with your decision.  Finding the right financial advisor is not an easy task, especially if you don’t know what to look for.  The following points will help lead you toward partnering with the best financial advisor:

1)      Independence: Independence is extremely important when it comes to considering a potential financial advisor.  It means that they can provide impartial investment counsel because there is no link or allegiance to any proprietary products.  Companies that have their own products may be more inclined to recommend them over other products if they are more profitable for the firm.  So, assure they are independent.  Ask if they are a registered representative of an independent broker dealer. 

2)      Communication: What will your communication be like with your advisor over the course of your relationship?  Many firms will tie you up in their endless phone recordings, so be sure that you will be getting personal service.  Someone should answer the phone when you call, and you should get prompt responses if you have to leave a message.  Regular meetings are also be a good indication that you will be kept abreast your financial happenings, so set a regular quarterly schedule. 

Are they putting in anything extra to make sure you have the information you need?  Do they send newsletters?  Do they have educational events?  Is there rationale communicated to you when there are changes in your account? 

It is also important to consider the source of your monthly/quarterly statements.  Are they being created in the advisors office on an Excel spread sheet? 

3)      Investments: Is the advisor able to clearly articulate their investment process so that you can understand it?  This is usually a good indication of the transparency and competency of an advisor and their team’s process.  It is very important as an investor to understand where you are putting your money.  While you are on the subject, ask if the investment is liquid.  Tying up a majority of your money in an investment that isn’t liquid could present major problems if something happens down the road that would require you to gather your assets.

Knowing that the firm’s investment process places importance on taxes is hugely important.  Is there going to be a day that you are responsible for a huge tax liability because of the investment decisions you make today?  Finding this out can be as simple as asking what the tax implications are of the investment. 

4)      Regulatory: Are there any FINRA complaints against the firm or individual advisor?  There are a number of clients and individuals that have complained about advisors, and FINRA makes those complaints public.  This is research that you can do on your own time: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

5)      Connection: Do you have a connection with this person?  Having a compatible relationship with your financial advisor is one of the most important criterion when deciding who to trust.  If you can connect, understand, and trust the financial advisor, you have figured out a major part of the puzzle.