Jeremy Jacques is a principal at Jacques Financial, LLC.
Choosing a financial advisor is about much more than just numbers. When looking for an advisor who is the right fit for your needs and objectives, your primary focus shouldn’t be on their firm size, their minimum investment amounts or even their past performance. It should be on the relationship you plan to build with them.
Your relationship with your financial advisor is a true partnership that must be built on a foundation of trust, ethics, transparency and consistency.
• Trust: You are opening up your life to this person. Can you be honest with them and trust that they will act in your best interests? Do you feel confident that they can leverage a broad range of knowledge and experiences to give you personalized advice?
• Ethics: You want to form a relationship with an advisor who has high ethical standards. What credentials do they hold? What ethical or regulatory guidelines are they required to uphold? Have they had any legal troubles in the past?
• Transparency: You need to know how an advisor works with clients and how they make money. What is their role at the firm? What are their day-to-day responsibilities? What is their fee structure?
• Consistency: You want to work with an advisor who will be with you for the long haul. What are their plans for the next five or 10 years? Do they plan to stay at this firm and in this role? Will you actually be working with them or with a more junior advisor?
Best Practices For Finding An Advisor
I recommend the following strategies to help you choose a financial advisor who aligns with your specific needs.
Define Your Goals And Expectations
Before you begin your search, ask yourself: Do I need one-time advice, or am I looking for an ongoing relationship? What services do I actually need?
If you want to manage your own portfolio and just need answers to a few specific questions, an hourly fee-only advisor is a good option. If you are interested in partnering with someone who provides ongoing financial support and is on call to answer questions and address concerns, an advisor who uses an assets under management (AUM) model—charging a percentage based on the value of your investments—is probably a better fit.
At our firm, my partners and I only use the AUM fee structure because it’s important to us to develop strong long-term relationships with our clients. We want them to be able to pick up the phone and ask us a question without worrying about getting invoiced for it, and we want to be held accountable for our decisions because we believe our work is solid.
Be honest about your expectations for this relationship, and make sure they are realistic. One of the biggest mistakes that I see investors making is putting too much weight on an advisor’s past performance—when performance is largely influenced by timing. No advisor can control the markets or predict the future with certainty. You can be working with a top-notch advisor and still have your investments go down in a down market.
Focus instead on understanding their overarching strategy. Why are they structuring your portfolio one way instead of another? Can they clearly explain their reasoning and processes?
Prioritize A Holistic Approach
Once you have a clear idea of the type of advisory relationship you need, seek out an advisor who takes a comprehensive approach to your financial planning. Can you go to them with not only investment questions but also tax preparation, insurance and estate planning concerns? An effective financial advisor with a holistic strategy should cover three key pillars.
1. Foundational Items
You want your castle to be built on a foundation of concrete and not sand. Your advisor should help you establish these essential building blocks, including life, health and disability insurance; long-term care; wills; and beneficiary structures. Every time I start a financial planning meeting with a new client, I ask: When was the last time you updated your will? If they don’t have one or it hasn’t been revised in years, that’s where we begin.
2. Savings, Accumulation And Distribution Plans
A holistic advisor works with you to build wealth over time—through savings and accumulation strategies—and a plan to withdraw it in the most tax-efficient manner—through distribution strategies. If you want to get all of your wealth accumulation and distribution planning in one place, look for a firm that has both registered financial advisors and CPAs who are licensed to give tax advice.
3. Positioning
You need all of your accounts to be positioned appropriately based on your goals, age, timeframe and income needs. The right advisor will work with you to ensure this alignment, not only with the accounts they manage but with any other accounts you have. If you have multiple accounts at different firms, your advisor should help you communicate with other advisors to position them for growth, conservativeness or distribution.
Do Your Due Diligence
Sifting through reviews online can lead to information overload, and it’s not always easy to determine which accounts are from real people and which are from bots. I think your time is better spent on these reliable forms of research:
• Solicit Recommendations: Ask friends and family members for referrals. If they have a positive, long-term relationship with an advisor, you can trust their recommendation.
• Talk With The Advisor: Once you have a shortlist of potential advisors, schedule a call with each. Discuss your goals, their strategies and their career plans. Ask if they work with clients remotely or in person. Assess if they have the expertise and commitment you are looking for, now and in the future.
• Verify Credentials: Look advisors up on BrokerCheck to verify their licensing and credentials, employment history and any regulatory actions or complaints against them.
Ultimately, this decision is very personal. Understand your priorities, do your homework and choose to build a relationship with an advisor who demonstrates trustworthy, ethical, transparent and consistent behavior.
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