A few years back, my wife and I encountered some life planning issues that we felt inadequate to handle. Not wanting to cause significant damage to our finances, we decided to seek the counsel of a financial adviser. For weeks we conducted a methodical search to track one down in our area.
We felt very nervous, opening our financial life – warts and all – to a complete stranger. Fortunately, our research found that most of the financial advisers in our area offered an initial consultation that didn’t require we make a long-term commitment to them. So with that encouraging news, we contacted four prospects and scheduled interviews.
In those four interviews, I saw the good, the not so good and the bad of the financial adviser world.
Looking For a Financial Adviser
These were the kinds of financial advisers we encountered:
Interview #1: The Index Guy
My initial reactions at interview #1 were positive. The adviser demonstrated a personable demeanor, had a professional looking office and was a good listener. All was going well until we started to discuss investing.
His investing philosophy was to only stick with index funds. He felt mutual funds could not give you a marginally better return than the market and were generally more expensive. Thus it was a waste of time researching them.
In some regards he had a valid point. Index funds are cheap and can be a vital component to any stock portfolio. However, his philosophy came across as short-sighted and to some extent lazy. It was as though he didn’t want to do the research to find funds that have a track record of beating the market averages.
It also seemed very self-protecting. If our investments did bad, he could just point to the index funds and blame the direction of the market. To me this seemed spineless, like he did not want to take responsibility for giving us advice.
Warning Sign #1: If the financial adviser isn’t open to investing strategies based on your circumstances.
Interview #2: The Insurance Guy
Financial adviser #2 had all the same personality traits and professionalism as The Index Guy. However, after some initial pleasantries were exchanged, he launched into a full-blown discourse on the need for insurance.
For 30 minutes he went on and on about all types of insurance…homeowners, vehicle, disability, liability, umbrella policies, supplemental insurance…nothing was out of bounds. I couldn’t believe he wasn’t catching my polite nods and the glazed look in my eyes. Or that my darting eyes were revealing I was cluing in that he wanted to sell us something.
The most unprofessional part was the scare tactics he used when discussing insurance. He told story after story designed to raise some fear and get us to bite on a policy. This guy definitely had an agenda other than advising us.
Warning Sign #2: If it feels like the financial adviser is selling you an ancillary product.
Interview #2A: The Two-Face Guy
About 40 minutes into interview #2, The Insurance Guy started asking questions. Somewhere in the dialogue, we revealed our Christian faith. At that moment, he did something I couldn’t believe.
He set aside the binder that contained the outline he had been working from and pulled out another folder. From it, he removed a sheet of paper containing Bible verses about money. For the next ten minutes he talked about stewardship and the Biblical approach to money.
Talk about pandering to your client. I was already feeling uneasy with his focus on insurance. Now he’s playing on my faith, pretending to be sympathetic to my Christian beliefs to get my business. No way was I taking advice from this guy.
Warning Sign #3: Instead of being honest, the financial adviser says what they think you want to hear.
Interview #3: The Newbie
Interview #3 never should have happened. This particular adviser was so new to the profession, he didn’t even have his own office space. He was subleasing an office room at a friend’s office.
I know every person has to start from the ground up. But he didn’t even have pamphlets with information to hand out and seemed very disorganized. The room we met in was sparse and uninviting – almost felt like an interrogation room.
In addition, the information he did tell us didn’t stand out from anyone else we had interviewed.
Warning Sign #4: They lack experience, organization and professionalism.
The biggest issue with these first three interviews encapsulates Warning Sign #5:
A financial adviser who doesn’t seem interested in learning about your needs.
None of these three took the time to let us share in depth about our perspective on money, our feelings about our situation or our future goals. We felt neglected through the entire process.
Interview #4: That Guy You Want
With three negative experiences behind us, we proceeded to interview #4. From the moment we stepped through the office doors, I knew there was something different about this adviser.
His secretary warmly greeted us and led us to the meeting room. She made us feel at home by offering us something to drink. As we sat down, she personally went to let the adviser know we were ready and then proceeded to introduce us upon his arrival.
The first part of our meeting was all about us. We told him about our personal background, family life, financial situation, risk tolerance and goals for the future. He asked some questions along the way to clarify and draw out other information we wouldn’t have known to give. In this time he didn’t offer advice, push a product or brag about his investment strategy. His whole purpose was getting to know us.
In the next segment he discussed how his firm operated and what levels of service they offered. He shared the company’s process of working with a client and the next steps should we follow through.
After that he opened it up for questions from us. Armed with our list, we asked him the big-ticket items you should ask any financial adviser, such as:
What is your personal background and experience?
What professional organizations are you involved with?
What licenses and certifications do you have?
Who is on your team?
What is your investing approach?
What type of clients do you advise? Do we fit your profile?
How are you unique from other advisers?
What is the company’s fee structure?
Do you think you can help us?
At the end of the questioning, he asked us to think on our decision and let him know in a couple of days. I already had a good feeling because we had actually made it though all our questions, something we really hadn’t bothered to do at the other three interviews because they had gone so poorly. We knew before we pulled in the driveway at home this is who we wanted.
Working with a professional certainly has its benefits. Like any profession, however, there is a great deal to be wary of in this field. Be ready with your questions as you interview advisers. Above all, make sure you find one that is focused on your needs and is willing to tailor his or her strategy to meet your comfort level.
Questions: Have you ever worked with a financial adviser or met any of the ones I described? What was your experience? Has any financial adviser ever pressure you into a product or strategy you were uncomfortable with? What other questions should you ask during the interview?
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