You: Can I trust a financial professional?

Yes, but always verify.

You: What?

Trust, but verify. No matter the quality of a financial professional, no one ever will care about your financial well-being as much as you will.

You: Even the good advisors?

Yes, even the good ones. A quick aside: Previously, I worked for a Fortune 500 company. One day, my boss’s boss–someone who was a bit of a mentor–told me that no one would ever care as much as I would about my career. She clarified that no one would ever be as concerned as I should be about whether I was taking the right assignments and doing the necessary things to ensure my career growth.

You: Really? Sounds like you weren’t too popular there.

Actually, she liked me and my work. Her point was that it was simply human nature, regardless of who might lead me to believe otherwise, that everyone else would have their own priorities.

You: I get it, like their personal career advancement?

Yes. So, in effect, she was just being explicitly honest with me.
You: You mean speaking with Total Candor.

Precisely. The same rule of thumb applies when it comes to the management of your personal finances.

You: Does that mean I shouldn’t use a financial advisor?

No, it does not mean you shouldn’t use professionals. Professional advice is seldom a bad idea, especially if you’re choosing between advice and procrastination. However, never delegate responsibility to another individual, only expertise. Always evaluate carefully (i.e., verify) who you trust.

Although many excellent financial professionals are available, there are also those who take advantage of others’ ignorance for their own self-profit.

Gary: That’s an oversimplification!

Big word, Gary. These are the planners you do not want to work with. Furthermore, there are other professionals who may do their best but are just not great advisors. Their advice might lack awareness of other, more appropriate opportunities available to you because such options are beyond the scope of their expertise.

You: So what can I do to increase the chance that I pick a good financial professional?

If and when you decide to seek the help of a financial professional, treat it like the establishment of any new professional relationship, like a doctor. Talk to friends to get their recommendations. Meet with some – do any advisors seem particularly effective in their attempt to understand you? Is their office staff competent? Will they provide you with at least a basic financial planning education?

Ultimately, interview several candidates and ask each the following question:

How are you paid?

The ideal response you want to hear is “Fee-only.” You don’t want the planner to say “Commissions” or “You don’t have to pay me anything; I get paid by other companies based on the products you buy.” (The last two responses mean the same thing).

In general, commissions are unattractive from your standpoint because you want your best interest to be the only thing influencing the planner’s advice, not the amount of commission the planner earns by recommending one course of action over another.

Still, there are lousy fee-based financial planners out there and some excellent financial professionals who take commissions, so the payment question isn’t the only thing that matters. But advisor compensation is an important consideration and should be known at the outset of the relationship.

It’s best to choose a financial planner with good references from people whose financial situations are similar to your own. Such references are among the best ways to find any good professional and to avoid the Gary’s of the world.

Gary: I’m right here!

But none of my friends recommend you.

You: Neither did mine.

Good. Anybody here meet Gary? Tell us about your experience. Misery loves company and we can all learn from one another. Just make sure you refer to your misguided advisor by the name “Gary.”

Bookmark and Share

Leave a Reply

You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>