What Can a Financial Advisor Get Me for My Money?

If you haven't worked with an advisor before, you don't truly know what to expect. Sure, you've seen financial planners and brokers on television shows, but you're doing your own reality program here. Even if you think you know what to expect from an advisor, learn about everything available.

One key place where consumers make a mistake is that they focus entirely on the bottom line, without recognizing that what matters with an advisor is the journey to reach that end point. Consumers focus in on "How much money have you made other clients by picking mutual funds?" rather than on "How do you determine what mutual funds are right for me?"

What most people want from a financial advisor -- particularly financial planners and people who manage money -- is "emotional discipline," the ability to put together a sensible plan and then stick with that program through thick and thin.
The advisor doesn't just determine the strategy or pick the investments, she provides the hand-holding necessary to see the plan through tough economic and market times.

Smart Investor Tip

Your needs and desires must be a match for what the advisor is offering, or you'll never be satisfied.

Just as you would want a refrigerator salesman to explain the different ways the removable shelves can improve your life and allow you to decide whether it is worth paying for a second "crisper," so can you talk to a prospective financial advisor about what the relationship is going to be like and what you can expect. Will it be regular phone calls and the ability to chat without receiving a bill every time you need a consultation because you anticipate a major event in your life? Will the broker accept your calls whenever the market makes you nervous? Does the accountant or financial advisor offer a regular newsletter to customers, and is that publication merely a pass-along from a national office or does it reflect the advisor's feelings about the market, economy, law changes, investment strategies, and more? How much of your contact with the advisor will be person-to-person, and how much will be you getting blast-mail tweets because your counselor uses Twitter to soothe clients?

Your needs and desires must be a match for what the advisor is offering, or you'll never be satisfied.

Can One Size Fit All?

Bankers can sell you investments, many insurance agents do financial and estate planning, accountants and tax preparers offer investment advice, stockbrokers now offer planning services, and financial planners offer just about everything.

These hazy definitions and boundaries make it so that advisors frequently cross the line from one specialty to the next, hoping to sell you another product or to capture more of your assets under their management.

It's tempting to let an advisor cross the line into a different arena, because you already enjoy working with him, he understands your situation and has earned your trust. One-stop shopping is a convenience many people desire.

But a good accountant isn't necessarily an outstanding financial planner, or vice versa. Advanced credentials are no guarantee; the fact that a counselor studied for a certificate in another specialty does not make him good at that job, especially if it is no more than a sideline business. While it may be common practice for an advisor to wear two hats, it is malpractice if he can't do each job equally well.

Over your lifetime, you are building a team of financial advisors, and you don't want a team of "utility infielders," players who are qualified to fill many vacant positions, but not good enough to star at any one job.

Each job an advisor is going to do for you requires starting your search from scratch, asking new questions and determining whether you can be as happy with her counsel in the second area as you are in the job you first hired her for. You don't want to be her guinea pig. Without the same expert credentials as a full-time practitioner, you should stick to one advisor for each need.

And while consumers value convenience, think of the potential inconvenience, too. If the advisor fails in his second job on your team, you actually lose counsel in two areas, as your primary relationship is likely to be impaired when you fire him from his secondary role. Financial services is not a one-size-fits-all business; if an advisor's play to get a bigger role feels forced or the least bit uncomfortable, don't let it happen.

By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2020. Content published with author's permission.

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