How to Evaluate Your Financial Advisor

By Noel LaMontagne

While there is no exact right answer to finding a trusted advisor out of thin air, there are several ways you can arm yourself for the process and once you get on the path, feel good knowing when you have arrived.

In summary:

  • Embrace the process of developing a business relationship with your advisor over time
  • Learn about your advisor’s motives, credentials, and expertise
  • Ask how your advisor is compensated at all levels of their business and the total fee you will pay
  • Insist on transparency of your advisor’s actions and transactions
  • Find what resources, educational materials and professional network your advisor makes available to you
  • Continually review and hold your advisor to your high standard

The process, and patience with the process, is the first part of the approach. Good things take time and they are rarely easy. Today we have become accustomed to having access to everything we want whenever we want it. While this is convenient when you are ordering products online, but when you are establishing and building trust with someone who is going to help guide you through important aspects of your life and business, be patient. It is okay if things do not seem exactly right immediately, both sides of any relationship need time to learn about one another and work through their differences while not always relying on their similarities. Over time, the understanding that you develop for one another will start to form a strong foundation for long term trust.

Evaluate and make sure that your motives are aligned with your advisor. Your advisor is there to help you help yourself. We believe the best advice is unbiased. Determine if the advice outcome affects you the same way it affects your advisor, if it leaves the advisor unaffected regardless of the outcome, or if a negative for you leads to a positive outcome for your advisor. Compensation is a perfect way to determine if advice is conflicted, especially if an advisor receives higher compensation based on which advice is given. A simple way to look at this concept is to focus on the idea of what is in it for the advisor, and if the answer is anything besides finding the maximum benefit for you, the client, there may be an issue.

This leads directly to the ability to question things and seek transparency. Unbiased advice is vitally important, but that advice also needs to be delivered in a transparent way. If questions or disagreements exist, they need to be discussed, understood and resolved in a manner that is okay with you the client. The goal of seeking and receiving good advice is to be able to use it to help you make the right decision. This does not mean you will always go along with the advice given, it just means that you understand where it is coming from, you know it is sound, and you know that it is honest and in your best interest.

The breadth of the resources used to formulate the advice should be extensive and expert. All the prior characteristics of trusted advice will not amount to much if the basis for the information you are receiving is not customized and comprehensive. Any advisor that is worth their weight will also have an extensive and trusted resource base to tap into whenever needed. No one can be expected to know everything, but when information or expertise is needed in order to offer the best advice for the client, a trusted advisor will know where to turn. All the prior characteristics of unbiased, transparent and expert credentials should apply to this next layer of networked advisors.

Once you have held an advisor to these standards over an extended period of time, they have met your expectations, and you have continued to utilize their counsel whenever you have needed it and in whatever form, you should be able to rest easy in knowing that you have found and vetted a trusted advisory relationship. A trustworthy, unbiased, transparent, extensively qualified and connected advisor will help empower any client to be their very best and most productive version of themselves.