What a huge question. Is there a right or wrong expectation? Should they just give me ideas or even commands about financial decisions? Can I just hire them and they take care of everything? Should I just assume each advisor charges the same amount of fees? Will they ask me important questions that I am not thinking about or will I need to bring the questions?
Each person that comes into our office has a different expectation of what we as financial advisors do and what they should do as they work with us. Millennials typically come in without much experience in finances and are looking for some general guidance and advice as they begin planning for their future. Many others are baby-boomers who have been working with an advisor for
I’ve put together a list of the expectations that I believe are important to consider when choosing or evaluating a financial advisor.
To Have YOUR Interests In Mind
I list this first for a reason: I believe this is the most important expectation of your financial advisor. Financial advisors play an important role in helping people with their financial goals (retirement planning, education planning, estate planning, business planning, etc.) and accordingly, deserve to be fairly compensated. However, compensation should not be the reason for giving their advice. In other words, your advisor should make recommendations based on what you need, not based on how much they may or may not be compensated.
If an advisor acts as a fiduciary, then they are legally obligated to place your interests ahead of their own interests when making recommendations. I highly recommend working with an advisor that works under this standard. If you want to learn more about the fiduciary standard, click here.
To Help You Create REALISTIC Financial Goals
Every person has their own financial goals and needs. And since everyone is at a different place in life with wildly different wants and needs, no two people are in the same situation. This means every single person has a different amount they need to save for retirement, or different amount of life insurance, or
So when setting your goals, where do you start? Which is most important? Most of us have no way of knowing if those goals are even achievable or appropriate. One important expectation in working with a financial advisor is that they work with you to set realistic, achievable, and appropriate goals. They should have the knowledge and the means to create a plan that is just right for you. This is important, not only because it’s hard to determine where to start, but also because some people have unrealistic ideas; they desire investment returns that are not really feasible, they underestimate the cost of medical care, or they unintentionally plan to incur a major tax bill. A good advisor will listen and give advice that you need to hear, but not always what you want to hear. They will point out things that you may not have considered or planned for. This takes me to my next item:
To Give You An Unemotional Recommendation
I think it’s safe to say that we all have one thing in common when it comes to money: We don’t want to lose it! This is an emotional attachment that we have. For fun, go to Amazon and search for the keywords “emotional money” and look at how many books have been written on the subject. As of today, I see 706!
When it comes to making a financial decision, emotions can get in the way. They can cloud our
To Provide You with Enough Education to Understand
Most people don’t have the time, the resources, or even the desire to research all of the financial products, strategies, concepts, and laws. Even as an advisor, it can be overwhelming (especially when you factor in how it keeps changing due to legislation or new research and ideas). There is an ocean of information out there.
No one should feel like they don’t understand what they are paying for or why they need it. When making recommendations, a good financial advisor will explain enough of the concept or strategy to help you understand why they made the recommendation and why it could be an appropriate option for you. Financial advisors should create a written financial plan that helps explain everything further.
As an analogy, you wouldn’t want your doctor to say, “You need to exercise more.” That doesn’t really help. Instead, I’d rather hear, “Your blood pressure is too high because your heart has to work harder due to the weight you gained at Thanksgiving. If you exercise and lose 10-15 pounds, you will feel better, look better, and your blood pressure should lower.” Ok, now I understand the reasoning behind the recommendation and have a goal!
To Communicate Regularly
At the very beginning of your business arrangement, you and your advisor should determine how often you will communicate. There are many factors to consider: How often does it make sense to meet? How often do you feel comfortable meeting? Are you expecting changes in your financial life like marriage, kids, college, business sale, work bonus, retirement, etc.? Have there been changes in the market/legislature/world that would affect your financial life?
A good financial advisor will always make sure that you know the next time you should be in communication with them. If there are several events expected to affect your financial plan, then you may need to meet more often. Also, if you are close to a big event, like a business sale or retirement, then meeting regularly in a short time, like monthly, may make sense. However, if you don’t have any events on the horizon, it may make sense to only meet once or twice a year as a
No matter your situation, your advisor should discuss with you and you should both decide what the expectation should be going forward.
To Pay Them
I love free stuff. Doesn’t everybody? I go to Cardinals baseball games early to get their giveaways. I go to Panera on my birthday for
When I go out to restaurants and get great service, I always tip my servers well. When I get my car serviced, I make sure I talk to and trust the people there. These are examples of how I want great service, and I want to make sure those service providers are fairly compensated.
When you work with a financial advisor, you should expect great value for what you pay them; but not to overpay for products. They are providing you with their advice, their research, their experience, and their services. And for that, they should be fairly paid.
To Refer You To Other Professionals As Needed
Many advisors have a specialty or a focus. They may be very experienced and knowledgeable in taxes or retirement plans or life insurance. But it is very difficult for an advisor to be a specialist in all of the many areas of the financial world.
When working with a financial advisor, at some point you may need or ask something that your advisor cannot help with. You should expect your advisor to defer to other professionals in those areas that they do not specialize. However, most great firms will have someone
For example, if you ask a difficult or obscure tax question, you may be referred to a CPA or other tax professional. Or if you need to create a trust or a will, you may be referred to an estate attorney. When it’s time to sign up for Medicare, you may be referred to a Medicare specialist. Your financial advisor should be a part of your
It’s important to take some time and evaluate your financial advisor. While you can certainly plan your financial future on your own, their advice and experience can truly make living out the plan much less stressful and even enjoyable. This list is what I feel are important. I hope you can use this list to have direction and be confident when you are evaluating your financial advisor.