There is a reason why the financial industry has such a terrible reputation and it is particularly well-deserved when it comes to financial advisors. There are way too many salespeople and very few professionals in our industry.
At the same time, the financial advising industry can save the country from crippling material insecurity and help lift generations out of poverty. Advisors have a sacred role to play, but too often, most are in it just for the money. Here are 5 things to look for before hiring a financial advisor.
1. Make sure they’re qualified
There is an old saying that if you want to go broke, talk to a broker. There are unbelievably lax standards in order to manage money for other people. A high school education and passing an industry-required test are all most will need to be successful. Very few have actually taken the time to dedicate themselves to perfecting their craft. The good news there is a way to separate the wheat from the chaff.
We cannot recommend enough professional certifications like the Certified Financial Planner® (CFP®), or certifications from The American College (ChFC®, CLU®, RICP®, etc.). These certifications usually take several months or even years to get for many advisors and for good reason. They require a certain level of competence that is a positive boon to our industry. If your prospective advisor doesn’t have such a credential, most likely they are not qualified.
2. Count your fees
A well-qualified advisor has earned the right to charge fees to clients because they have put in the time and effort. That being said, make sure the fees your qualified advisor is charging are not excessive.
“Excessive” is a subjective term, but if your advisor is charging you an arm and a leg to manage your money (more than 2% per year), over time those fees will add up to quite a bit.
3. Interview your prospective advisor to see if they are constantly improving their craft
Ask your prospective advisor how they come up with decisions on investing. The reason you are going to ask this is because you want to know if they are constantly perfecting their craft or if they are just good at playing the psychologist.
Imagine if you are a doctor or lawyer. There is really no good doctor or lawyer who would not be keeping up with the latest developments in their industry or is in a state of constant improvement. The same goes for financial advisors.
4. Communication is key
At ConCap®, all new clients start out with a client call with their advisor once every 3 months and down the line, and only if the clients want it, do those calls go to a minimum of once a year. That most definitely is the anomaly. For most financial advisors out there, you will be lucky to hear from them more than once a year.
Also, gauge the responsiveness of your advisor when you email or call. Contact your prospective advisor a few times before hiring them and be sure that you get a response back in a timely manner. Here at ConCap®, the standard is one business day. It is a real shame that isn’t the same at most firms.
5. Character matters
If you have decided to work with a financial advisor, then you’ve decided to enter into a lifelong relationship that is built upon trust. If you have any other ideas, then you should do it alone.
In any relationship, trust is paramount. And you cannot have trust unless you have a relationship based on honesty, integrity, transparency, ethics, and so on; in one word, character.
Unlike the conventional wisdom for relationships, in the world of financial advising, opposites do not attract. You generally get an advisor that mirrors your own character. From our experience, it is far more rewarding to work with the positive folks, which is why we have made those character traits a requirement for any prospective client at Concap®.
If you are not a ConCapper, don’t hesitate to reach out to us to see how we could help in your financial independence journey. Visit our Requirements page to get connected. We invite you to like and follow our Facebook page to get real-time access to our new articles and company updates.
Sources:
1 – News Release: Bureau of Labor Statistics U.S. Department of Labor. (1981, February). Employment and unemployment: a report on 1980. Retrieved September 30, 2022, from https://www.bls.gov/opub/mlr/1981/02/art1full.pdf
2 – Caporal, Jack. (2021, October 6). This Is How Credit Card Companies Hauled in $176 billion in 2020. The Ascent: A Motley Fool Service. https://www.fool.com/the-ascent/research/credit-card-company-earnings/
3 – Dickler, Jessica. (2022, June 27). 58% of Americans are living paycheck to paycheck after inflation spike – including 30% of those earning $250,000 or more. CNBC. https://www.cnbc.com/2022/06/27/more-than-half-of-americans-live-paycheck-to-paycheck-amid-inflation.html
4 – Hoyt, Brian. (2010, January 28). Removing Oligarchs from Per-Capita GDP. World Bank Blogs. https://blogs.worldbank.org/psd/removing-oligarchs-from-per-capita-gdp
5 – Hoyt, Brian. (2010, January 28). Removing Oligarchs from Per-Capita GDP. World Bank Blogs. https://blogs.worldbank.org/psd/removing-oligarchs-from-per-capita-gdp
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