I recently read an alarming statistic. Nearly half of Americans admit to having difficulty knowing the sources of financial advice that they can trust.
Most bothersome about this fact is that most Americans also acknowledge they need help. The 2013 Financial Literacy Survey revealed that 78 percent of people say they could benefit from professional advice on their financial issues, and 40 percent of the respondents graded their knowledge of personal finance at a “C” or below.
While thinking about these statistics during my morning routine — breakfast with my husband and son, drop son off at school, commute into work — I made a mental note of all of the offers of financial advice I have recently received. I lost count after a few dozen.
It’s no wonder people don’t know where to turn for help.
When people approach me for financial advice, I encourage them to talk to at least two other financial advisors before making a decision about whom to do business. Ask all three the same questions you have about finances. This will allow you to get a glimpse of their method of sharing information with you and a feel for whether their method works for you. I tell them to look for the character traits in an advisor that they would look for in a friend because these are some of the most important elements of the advisor-client relationship.
» 1. Listens. Trust may be the most important element of a successful relationship with your financial advisor. You have to be able to feel comfortable enough with the person to share your questions, vulnerabilities, hopes and fears. It can’t be someone who intimidates you or makes you feel inadequate in any way. Therefore, you should find an advisor who truly listens to you, and doesn’t rush to solution.
» 2. Genuine. You want friends who you think are sincere and are comfortable in their own skin. Similarly, you want to work with an advisor who you feel is genuine and qualified. Explore their background, and make sure you understand their areas of expertise and investment philosophy. Ask for references, for the advisor’s Form ADV and check with your state securities regulator to find out if they have ever been subject to disciplinary actions. If the advisor is a registered broker, you may check their background at www.finra.org/brokercheck.
» 3. Keeps you in the loop. Friends look out for each other. They know what is going on in each other’s lives, and they bring to the other’s attention items of interest. A good financial advisor should do the same. They will alert you to opportunities, financial strategies and concepts that may help you achieve your financial goals.
» 4. Doesn’t hide things. When you work with a financial advisor, you don’t cede control over your financial future. The reverse is true; your control increases. Good friends don’t try to hide facts even if they are unpleasant. Likewise, a good financial advisor will give you full transparency into the details that matter, such as an assessment of risk involved in your strategies and how they receive compensation.
» 5. There for you. A true friend returns your calls even when busy. Your financial advisor should do the same. The No. 1 issue — even above portfolio performance — for dissatisfaction with a financial advisor is their inaccessibility and unresponsiveness. Make sure you work with someone who is there for you when you need them.
» 6. Provides reality checks. A good friend will let you know in a kind and supportive way when you are out of line. By the same token, a good financial advisor is going to watch over your financial world. They will let you know whether there is alignment between your daily actions and long-term financial goals. For example, if you planned to put $2,000 aside each year for college funding for your children, and 18 months have elapsed without any account growth in the 529s, you should expect a phone call.
» 7. Guards your secrets. Financial matters are private. You must have absolute confidence that your advisor can maintain confidentiality in all of their dealings.
I’m fond of the adage that people come into your life for a reason, a season or a lifetime. I find it uplifting that lifelong friendships can be forged at any age. Similarly, while there may be a pressing reason for wanting financial guidance, it’s best to have a long-term view when selecting with whom you want to work. The advisor who earns your trust today should be a resource that you can rely upon as your life unfolds well into the future.
— Bibi Taylor, MBA, is a wealth manager for AmeriFlex, 3700 State St., Suite 310, in Santa Barbara. Call 805.898.0893 for more information.