What to look for in a financial advisor—according to advisors
If you are trying to decide on a financial advisor, perhaps you should ask another advisor. CNBC queried several industry pros on the most important qualities to seek when choosing a financial professional.
It’s essential to try to understand what clients are saying, even when they’re not talking, said Robin Young, certified financial planner and president of Northstar Financial Planning.
Rick Kahler, CFP and president of Kahler Financial Group, described a good listener as “someone with the understanding and ability to follow the client to where he or she is.”
He asked, “How would the advisor respond when the client is fearful and wants to go to cash? Or if they weren’t following through on an action item or recommendation?”
Another important aspect of listening is being easily available and generous with the time you give to client discussions, said Richard Colarossi, a CFP and accredited investment fiduciary with Colarossi & Williams.
In tune—with self and others
It’s important for advisors to be in tune with themselves and conscious of their own feelings, said Northstar’s Young.
Kahler said he would look for an advisor who is introspective, self-disclosing, transparent and humble.
“Will they be willing to show you their warts, or are they just trying to impress you?” he asked. Kahler said advisors should be able to answer questions like:
- What’s your relationship with money?
- What feeds your soul?
- What’s the worst financial decision you have made personally?
- What personal unconscious beliefs about money have not served you well?
- What is your experience in engaging a financial advisor for yourself?
- Can you tell me about a client who has experienced a transformation as a result of your services?
Depth and breadth of professional experience is essential, said Michael Salley, wealth manager and president and CEO of Salley Wealth Advisors Group.
“Has the advisor been through several market cycles, downturns and upswings?” Salley asked. “He or she should have a minimum of 10 years’ experience — 20 years if the client is extremely wealthy — especially considering that Wall Street has become tremendously more complex with its products.”
For her part, Young added that it’s also important to look for an advisor with diverse life experience and wisdom.
Integrity is an important core value, said Colarossi. The client needs to easily perceive that an advisor is fair and honest.
“As an advisor, you should be able to explain clearly how you run your business and your processes and why,” he said. “Also, disclose what you are not a specialist in.”
Salley said his status as an independent advisor is a powerful tool ensuring integrity.
“When my clients don’t do well, I don’t do well,” he said. “Working for a large wire house with its own agenda, products, cultural biases, sales quotas and profit margins means that you can’t respect the individuality of each client.
“As an independent, your sole job is to key in on your clients’ wants and needs,” Salley added. “It forces you to drive your business with the highest level of transparency.”
Salley also believes an advisor should take an extremely long-term, Warren Buffett-type philosophy of investing.
“You need an advisor who’s going to hold your hand to help you ride out the storm and keep you from selling off during bad times,” he said. “As the saying goes, ‘Your clients don’t need you when times are good.’”
A long-term approach is also necessary in terms of the advisor/client relationship, said Kathleen Roth, CFP and partner with Waterstone Financial Services.
“You have to spend some time exploring the relationship and see samples of their thinking,” she said.
Advisors should seek specific training in behavioral skills, Northstar’s Young said, as well as specialized competence in areas of deep interest, such as working with widows or clients in transition.
A broad knowledge base of formal and informal education is reflective of the advisor’s longevity, integrity, goals and confidence, added Colarossi. Holding credible designations, along with membership in financial associations, suggests an advisor is keeping up with chapter meetings and continuing education.
“It shows that he or she takes the time to stay on top of their field,” he said. “It takes a lot of reading, whether the area is legal, insurance, investments, etc.”
—By Deborah Nason, special to CNBC.com