Author: Brian Parker
Check out this article that was originally featured in TheStreet.
In the wake of this year’s pandemic-related market volatility, many investors have turned to financial advisors for guidance, some for the first time. In a Nationwide Retirement Institute survey of over 2,000 U.S. adults, the pandemic prompted nearly half to conclude they need financial and investment management support, while almost 25% said they are turning to an advisor for the first time. The decision to work with an advisor should not be taken lightly, and investors should strategically consider who they will partner with to help them meet their goals.
To start, there are some standard questions you can ask. For example, is the advisor a fiduciary? What designations do they have? Are they fee-only or fee-based, or do they receive commissions? If they are fee-based, what are they doing for that fee; do they work on tax returns or review insurance? Is the fee flat, or is it determined by the client’s assets under management? Do they tax-loss harvest? Does the advisor actively manage investments? Do they rebalance portfolios? How many clients do they have?
These questions just scratch the surface, and are incredibly important in the selection process. But they don’t hit on intangibles, which are just as important. The intangibles focus on the emotional and personal side of wealth management, and their merit is supported by data. Research by Vanguard, among other academic studies, found that behavioral coaching could result in an extra 1% to 2% in net return. This means that finding an advisor is about more than checking off boxes on a list. It’s about building a relationship, and this is where “softer” questions come into play. Ask yourself, do I feel they care about me and my loved ones, as well as my goals? How is their bedside manner? How do they respond to adversity? Do they put my mind at ease? Are they cutting-edge? In other words, do they keep up on policy changes and how they could impact clients? How committed are they to the craft? Will they be proactive? Are they responsive when I reach out?
The latter can be especially key. It’s not uncommon for investors to feel their advisor isn’t hearing them. Natixis Investment Managers this year surveyed 300 financial professionals in the U.S. The survey found two main reasons why advisors may be missing the mark in client relations, “not communicating with clients in a way that meets their expectations” and “not listening to the needs of clients.” The importance of communication is underscored by a Spectrum Group survey, which noted that almost two out of three high-net-worth respondents ages 71 and up would sever ties with an advisor who fails to return calls in a timely manner. This emphasizes that working with an advisor is about more than just numbers in a spreadsheet.
Working with an advisor who you trust, who listens to you and truly cares about your situation, your goals and your legacy makes all the difference when it comes to executing on your financial plan. Below are a few examples of how you could benefit from working with a financial advisor.
Finding someone who understands your financial situation and who will be with you for the long-term can offer strategic advantages. Generally speaking, the most successful advisors go beyond analyzing cash flow and income to truly understanding each client’s history, goals and motivations, whether they involve saving for retirement or funding education for the next generation. The goal is to find an advisor who understands — and cares — about your personal objectives and needs. As previously mentioned, there are some questions you can ask to start. These questions and other considerations for the advisor selection process are available here.
Brian Parker, CFP®, is co-founder and managing director at EP Wealth Advisors, an independent registered investment advisor that specializes in client-centric financial planning and investment management services. Brian co-founded the firm in 1999 to change how consumers received financial services. He encourages clients to dream big and then helps them to plan accordingly. He has been in wealth management for over two decades.
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