Selecting an Investment Advisor 

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” 

Choose a manager who is independent, consistent, communicates well, measures success by clients' performance, listens first, teaches rather than tells, has low fees, and with whom you are comfortable. Choose...

  • a Registered Investment Advisor with the obligation to put their clients' interests ahead of their own. 

  • advisors that are independent of investment company products and pressures.

  • a consistent investment philosophy which provides long term performance. 

  • communication styles that fosters understanding of clients' unique objectives and risk tolerances.

  • an advisor that measures success by his clients' real performance.

  • a fee-only advisor that minimizes costs and taxes.

  • understandable investments in which you feel secure. 

  • the advisor who candidly discusses results during up and down markets.

  • advisors with who you are comfortable enough to confide your hopes (objectives) and fears (risk aversion). 

Common mistakes in selecting investment managers and advisors:

  • Referrals: The best method to identify potential advisors is through referrals. However, most people don't know how to evaluate their own manager

  • Is he or she rich: Successful advisors get rich from the power of compounding, not from client fees. While being "poor" should be a disqualifier, having a rich advisor doesn’t mean you’ll end up that way too.

  • Large amount of assets under management: The amount of money under management often hinders performance.

  • Works for a large brokerage, bank or investment company: Brokerages, banks and investment companies put their business first (generating profitable returns) and the profession second (meeting client needs) – check your advisor’s history.

  • Has other clients in your economic bracket: Managers and advisors that specialize in a certain economic bracket often develop a one size fits all solution.

  • Has a large number of clients: A large number of clients may inhibit the advisors ability to respond to (new or smaller) client needs.

  • Use an accountant or lawyer: Accounts and lawyers will not have the knowledge, time and commitment to advise clients about their investments (most successful ones use an investment manager themselves). 

  • Use your stockbroker: A stockbroker, by law, only has to make sure his recommendations are suitable for his clients and must put his company's interests ahead of his client's. An advisor has the fiduciary responsibility to put this clients’ interests ahead of his own, a much higher standard that aligns with client interests.

  • Use a certified financial planner: Certified financial planners have neither the time or expertise to be proficient in all aspects of your financial life (investments, insurance, estate planning, etc.). They should oversee your entire financial program, participating with you as your interact with your advisor to insure your objectives are understood, and help you evaluate the results to insure you are on track to achieving them. 

Questions that can indicate if you need an advisor or asset manager; or need to make a change from your current one:

  • How do you respond to under-performing the market for a week, a month, a quarter, a year or 3 years?

  • How did you handle the 2000 to 2003 market downturn? Have you participated in the market sufficiently since 2003?

  • Does market volatility keep you up at night, make you delay financial decisions, or make you spend inordinate time 'watching' your portfolio?

  • Do you trade in and out of securities often and at the wrong times? 






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