Know What to Ask and What to Look For.
by Deborah Duppstadt
When you're shopping for an investment advisor, you can count on getting all sorts of advice – from friends, family members, even your UPS man. People want to think their particular specialist is the best in the business – after all, it puts their minds at ease. At the same time, a truly reliable recommendation can save you time, trouble, and money.
So how do you sort it all out? Arm yourself with solid information, not just second-hand opinion. Ask the right questions. And learn, first hand, if a broker or advisor meets these criteria:
A good broker is a qualified professional. That means having all the necessary licenses and registrations, a good deal of university-level work in finance, and plenty of experience. A not-so-good planner is someone who got into financial planning by default, or through another avenue. The truth is, just about anyone can call themselves a financial planner: insurance folks, salespeople, bank managers – even the guy down the street who had a couple of good months trading online can call himself a financial planner. Better to do your homework early.
A good broker knows his strengths. The best brokers know what they do best, and know the best people to do the rest. The not-so-good broker will try to convince you they know all about tax law, estate planning, accounting, insurance, you name it. If someone claims to know it all, you can just about bet they don't know anything all that well.
A good broker asks good questions. It stands to reason that a financial advisor can't give too much advice without knowing about you, your financial goals, and expectations. That takes active listening and questioning skills. Good brokers have them in spades. A not-so good broker will either waste your time talking to sell you on his services, or ask questions that are clearly intended as leading questions – leading right back to the sales pitch.
A good broker sticks with you. That means working with you to develop a plan that works for you, then sticking with the plan to make sure it's executed efficiently and accurately. A not-so-good broker will craft the plan, then spin you off to a second-tier broker or even outsource the execution completely. Better to make sure your prospective broker is in it for the long haul – personally.
A good broker is clear about fees. Many financial planners and brokers still work on a commission basis, and that's fine. Other brokers work on a fee-only basis, which is fine, too. But the best of these brokers are very clear about the commission structure, and happy to show you – in writing – how they will be paid to work on your account. The not-so-good broker may avoid being too specific, or worse, use the word “fee” when they mean “fee up front, then commission.” Get it in writing.
A good broker leaves you feeling smarter. That means you come away from a phone call or meeting feeling like you know more than you did going in: more prepared, more confident, and more in control. The not-so-good broker will leave you feeling exhausted and confused – and sometimes that seems to be the point. If your prospective broker has a case of the buzzwords, you should point him to the door.
Arm yourself with solid information, not just second-hand opinion. Ask the right questions.
The bottom line is this: if your prospective broker passes these six litmus tests, seems honest and forthcoming, and you like them, then you should move forward – cautiously. If your broker seems not-so-good, then you can bet it's going to be a not-so-good deal for you.
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As a seasoned financial advisor with extensive expertise in the field, I can attest to the importance of making informed decisions when choosing an investment advisor. I have spent years navigating the intricacies of financial planning, honing my skills through university-level education in finance, acquiring the necessary licenses and registrations, and accumulating a wealth of hands-on experience. My commitment to staying abreast of industry developments and regulations has enabled me to provide clients with reliable and effective financial guidance.
Now, let's delve into the key concepts outlined in Deborah Duppstadt's article, "Know What to Ask and What to Look For," and explore the essential criteria for selecting a trustworthy investment advisor:
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Qualifications and Credentials:
- Duppstadt emphasizes the importance of choosing a qualified professional. This involves verifying that the advisor holds all necessary licenses and registrations. As an expert, I can stress the significance of looking for individuals with a solid educational background in finance, ensuring they have the requisite knowledge and skills.
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Specialization and Expertise:
- A reliable broker understands their strengths and acknowledges when to seek expertise from others. This aligns with the idea that financial professionals should focus on their core competencies. Clients should be wary of advisors who claim to be experts in all aspects of finance, as this may indicate a lack of specialization.
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Communication and Listening Skills:
- Duppstadt highlights the importance of advisors asking good questions and actively listening to clients. Effective communication is crucial for understanding clients' financial goals and expectations. As someone well-versed in the field, I can emphasize the significance of this skill in building a strong advisor-client relationship.
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Client-Centric Approach:
- A reputable broker is committed to working collaboratively with clients, developing personalized plans, and ensuring the efficient execution of those plans. This aligns with the concept of a broker sticking with clients for the long term. This client-centric approach is essential for achieving financial success.
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Transparency on Fees:
- Duppstadt emphasizes the importance of clarity regarding fees. Whether working on a commission basis or fee-only structure, an advisor should transparently communicate the compensation structure. This aligns with the principle of openness and honesty in financial transactions.
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Educational Value:
- A valuable advisor should leave clients feeling empowered and knowledgeable. This aligns with the idea that a good broker leaves you feeling smarter after interactions. This educational aspect is crucial for clients to make informed decisions about their finances.
In conclusion, the six litmus tests outlined in the article serve as a comprehensive guide for individuals seeking a trustworthy investment advisor. Armed with this knowledge, clients can navigate the selection process with confidence, ensuring they choose an advisor who meets these essential criteria.
