Here are five indicators that can help you make a more informed choice.
There’s nothing simple about managing your finances. Many people are surprised to find that as they become increasingly successful, their financial lives become more stressful. Complexity increases—and so does the demand on their time and attention.
Thankfully, a financial advisor can support you. Here are five signs that can help ensure you’re building and fostering the right relationship with the right advisor.
#1: The financial advisor has a fiduciary responsibility.
Not all financial advisors are alike. In fact, only independent advisors1 are legally obligated to act in their clients’ best interests at all times. Their fiduciary responsibility requires them to take a holistic view of their clients’ finances, wherever they are held. According to Mitch Reiner, chief operating officer at Capital Investment Advisors in Atlanta, this is “the gold standard for serving clients.”
#2: They offer comprehensive financial planning, customized to your goals.
Many wealthy families and individuals seek sophisticated services—such as tax minimization, estate planning, and cash-flow analysis—to address their more complex financial needs. This explains why many independent advisors offer a broad array of services, whether through in-house expertise or a professional network. Comprehensive financial planning from an experienced advisor can give you back your time and help provide peace of mind.
A benefit of the independent advisor relationship is the level of personal attention it allows. Steve Branton, an advisor at Private Ocean Wealth Management in San Francisco, says that since independent advisors are free from the pressures that commission-based brokers may face, they are particularly well suited “to create a customized plan that lays down a set of principles to guide decision-making.”
“As the client’s life and circumstances change,” he says, “the independent advisor can partner in making decisions.” Clients of independent advisors benefit from personalized financial advice—not cookie-cutter solutions.
#3: The advisor holds you accountable to your plan.
One of the biggest financial planning mistakes people make is not having a comprehensive plan. The second biggest? Failing to implement or adhere to it. And while advisors work hand in hand with clients to create the plan, equally valuable is the advisor’s role in holding their clients accountable.
“It’s our job to offer checks and balances,” Branton says. “Oftentimes, clients don’t face hard truths about spending, for example, and don’t review their spending on an annual basis. We remind clients of their core values.”
Another area that clients often avoid is planning for changes in their own personal health. “Clients tend to be unrealistic about their futures and believe that they’ll remain healthy until they drop dead,” he says. “They overlook the fact that 50% of the elderly population ends up in need of long-term care at some point.”
Good advisors equip clients with the tools and knowledge they need to follow through with their plans in order to attain their financial goals and achieve long-term financial security.
#4: Their fees are transparent.
An independent advisor typically charges a fee based on a percentage of the assets they manage for you, which means their compensation increases when your assets grow. Or they are paid a flat fee. This kind of pricing is simple, keeps the focus on the client, and helps avoid hidden fees. Since they are independent, they don’t earn commission for selling a particular fund or investment product—and they are required to provide full disclosure of any potential conflicts of interest because of their fiduciary responsibility. Branton describes this transparency as a “hallmark of the independent advisor model.”
Within this set fee, independent advisors often offer a wide range of services, all while managing a complex network of related professionals, such as certified public accountants, insurance agents, and attorneys. “Today, an advisor can act almost as a coach, even offering career advice and creating networking opportunities that can help a client professionally,” Branton says.
#5: The advisor values and builds your trust.
Independent financial advisors like Branton say that for affluent families, trust is the most important factor in working with an advisor. “Trust is something that’s earned over time and comes from being authentic and admitting what you can and can’t do as an advisor,” he says. Key to building a relationship founded on trust is the capacity for high-touch, deeply personalized communication. Good communicators who can make complex financial topics understandable and who are good listeners make the best advisors.
According to Sammy Azzouz, managing partner at Heritage Financial in Woburn, Mass., an advisor should “start with a strong understanding of what’s important to clients in terms of their financial picture, their future aspirations, and the history of how they got to where they are today financially.”
Knowing something about your advisor is important for trust too. “In a world where small boutiques and local farm-to-table restaurants are becoming increasingly popular, there is a clear value placed on independently owned and locally managed businesses,” Reiner observes. “I own my own business, and I truly care about my clients,” he says. “I relish personal conversations about children and grandchildren and the vacations my work enables my clients to take.”
Comprehensive financial planning.
It’s these distinguishing factors that transform an advisor-client transaction into a trusting, lifelong relationship.
1 For this article, “independent advisors” refers to Registered Investment Advisors.
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