A Foolproof Way To Choose A Financial Advisor

Financial advisors cannot offer you market guarantees.

Financial advisors cannot replicate past performances.

Financial advisors may have limited access to investment options, depending on their license status, and what their firms permit them to sell—no one has access, or knowledge of, everything available.

So you cannot choose a financial advisor based on performance, place of employment, or anticipated investment results.

What you want to ascertain is how they think, how they use resources, and how they learn over time.

Start by doing the following:

1—Go online and look up the advisor on FINRA.  It is a government website that reports employment history, licensing status, and disciplinary actions.  It is not complete, and sometimes omits important history, but it’s a start.

2—Scour social media and the search engines for news and reviews.  Check out both the person, and the company.  Especially check out the company.  How tightly do they control what an advisor can do? How hard do they push products designed to benefit their company, or the product manufacturer, as opposed to the providing the best value for you?

3—Ask for references from people you know. The goal is not to see what those clients did, or what the outcome was, but to assess how the advisor runs his/her business.  Are calls returned promptly? Are they available to meet? Do they provide ongoing updates to clients without being prompted? In other words, will you get the service they need?

This will give you a good idea if you want to keep this advisor in consideration.  If you do, then:

4—Ask what they recommended or placed for their last five clients, and why they thought it was right.  Are they really paying attention to varying needs, or are they selling the same products to everyone.  Why? 

5—Ask about life insurance and disability policies that they personally own, and why they chose those products. This may be the most important information you get, because:

a—you can always change financial advisors, firms, and products.  The values go up and down, and you can easily take a profit, or a loss, and move on.  Portfolios can recover.  But insurance should be a permanent product.  You need to make the right choice the first time.  After a few years, it becomes expensive, if not impossible, to make changes, both because of your older age, and possibly, worse health.  Bad upfront choices just get worse over time.

b—financial advisors are notoriously unfamiliar with life and disability insurance. They usually buy insurance based on what they are promised or told, and not what they researched.  

c---If they are part of a large firm, they are encouraged to refer you to specialists within the firm, who are limited with what they can sell by firm agreements.  This is not a good sign as to an advisor's ability to think independently, and evaluate his/her own finances.

d---If they purchased from someone who is “captive” (required to sell on products produced by their firm) or even someone who affiliates with a particular insurance company, they may not have done sufficient research.





Leeron Cohen