A reader asked a question regarding how to select a financial planner. I’ve been humming and hawing trying to figure out the best advice to provide on how to go about doing this. I decided to do a Google search on that very question. There were a number of things I noticed:
1. There are lots of “checklists” out there on how to pick a financial advisor.
2. Many of those checklists are written by financial advisors.
3. Just as many of those checklists are written by financial advisor association groups. (Who basically steer you to one of their members)
4. I couldn’t find any truly good lists/articles (mind you I only looked for about 10 minutes, but it was all the same stuff over and over).
There were some common themes such as trustworthiness, fee structures, designations, references, etc. Yes those are important, but how would you know what’s what in the first place? The other major theme is that they all assume that you should just download all your financial responsibility to an advisor.
Here is the original question:
“I’m in young family mode, and have always known I’m leaving money on the table by not dedicating myself to my finances more. (tax planning, investments, retirement and now estate planning) I have RRSPs but no non-registered accounts. I, like many I suspect, am good (enough) at my day job, but don’t have the energy (nor do I really enjoy) making sure my finances, insurance, budget etc. are all aligned with my needs, risk appetite and long term goals….
All this is a long way of asking: How would you recommend arming oneself with enough info to do a good job of selecting a financial advisor to work with? I’ve crossed paths with some professionals in the past, where I’ve ended up being in the “Is this what I’m paying you for? I can do this myself” mentality. (Finding mistakes on my professionally done tax return, for example). I suspect I know the answer to this already but how would you recommend going about this? Referrals seem to work best, but for whatever reason, my acquaintances seem to be in the same boat. (Or don’t want to pay anyone for assistance). “
My final answer is probably not what the reader wants to hear (I think they are knowingly in denial, however), but I think it is the best advice I can give:
You simply cannot download the responsibility of your financial affairs to anyone else completely. Just as the other aspects of your life generally require work and effort on your part (raising children, studying, working, exercising, dieting, time management, chores, relationships, etc.) so do your finances.
That might mean really taking some serious time to interview a number of advisors on your own, developing a collaborative relationship with one of them (by collaborative, I mean you are actively involved with the advisor and use them more as a resource to help present you with options such that you are ultimately making the decisions instead of being sold a strategy or product), and also relying on unbiased third party sources of information to keep yourself up to date.
People achieve varying amounts of success (or failure) with their health goals and desires based in large part to how dedicated they are, and how seriously they approach these goals and desires. No pain, no gain unfortunately and the same relationship probably holds true with your finances.
I have some ideas and questions I would like to ask the readers of this blog – so that perhaps we can help out this particular reader and others in the future.
1. Should I actually create a questionnaire or test for investors to take to their financial advisors (or prospective financial advisors) to see how well they score on various aspects of advising/planning/disclosures/etc?
2. Should I offer to call any of his/her prospective advisors on the reader’s behalf and interview them on the phone, and then provide my direct assessment to the reader? (That would require you thinking that I know what I’m talking about though)
3. Any other suggestions or references you guys can point to would be welcomed in the comments section.
Note that I don’t have any experience finding a financial advisor/planner since I AM one (which also means anything written here has to be taken with a grain of salt because I am structurally biased), but perhaps those who feel they have a good relationship with their advisor could chime in as well with their thoughts.