How to Get the Most Value from Your Advisor
David Christianson, CFP, R.F.P., TEP
One way or another, you likely pay something for financial advice. All but the most ardent do-it-yourselfer uses a financial product or service which has a cost attached to it.
In a perfect world, these costs would be “unbundled” for you, showing you exactly how much you are paying for each of advice, investment management services, administration, and other costs, if any.
This unbundling and transparency is becoming more common but, in reality, these costs are often bundled together.
No matter what your arrangement, though, I am going to assume that you want to get the best possible value from your advisory relationship. This means actually establishing such a relationship with an individual advisor, as a first step, as opposed to simply purchasing products over the counter at a bank or credit union, or over the internet.
At our shop, we muse from time to time about why some clients have a great relationship with us and get a tremendous amount of value from what we provide, while others make it more difficult for us to provide true value.
Here are some suggestions. Rather than reveal all of my own secrets, I have looked to Dan Richards, president of a firm called Strategic Imperatives.
Dan has been an observer, coach, commentator and even CEO in the financial industry over a number of years. He recently hosted a series of luncheons with successful financial advisors and talked to them about the clients with whom those advisors have the strongest and most successful relationships.
Here is what those advisors revealed, interspersed with my own opinions and editorial comments.
1. Be honest
Being honest means fully disclosing relevant information to your advisors, so they can provide you with top quality advice. If I don’t tell my doctor everything relevant, I don’t expect an accurate diagnosis or prescription.
Honesty also means responding candidly when an advisor makes a recommendation or asks your opinion about the style or usefulness of her advice and services. Don’t just nod and say “everything’s okay”, the way most of us do at a restaurant. If they are falling short, let them know it.
Honesty also means being candid and working toward developing a compelling vision for your future and sharing it.
2. Invest time up front
We provide our new clients with an abundance of homework so that we can really get to know them, before we start to provide advice. We are fixated on finding out a person’s most important goals and objectives, so that all recommendations help move them toward fulfillment of those dreams.
Spend the time to get your message across fully and accurately.
3. Continue to commit regular time
Try to respond to your advisor quickly and completely, whenever additional information is needed. If forms need to be signed, get together or return the information on a timely basis. This is the cause of 90% of the mistakes that we see – clients fail to return information or forms promptly, subsequently lose them or miss deadlines.
4. Be consistent
Most changes to your plan, strategy, risk tolerance and other factors should be gradual and evolutionary, not 180 degrees. Obviously, the exception is when there is a life event that occurs. However, the message here is don’t switch from being a growth-oriented investor to an income-oriented investor every time the market goes up or down.
5. Try to maintain perspective
Money can be a very emotional thing, especially when the stock markets are collapsing. The stress can be magnified by inflammatory media headlines.
As an investor and client, try to maintain an even keel, as opposed to over-reacting to all of the fact and fiction in the media. Keep in mind that the more you watch business or investment news, the more you will hear conflicting points of view and the more you will be subjected to added stress.
6. Be open-minded
If you are always cynical or distrustful of the advice your advisor gives you, it’s time for a new advisor. You always need to have a healthy dose of scepticism, but hear the arguments and recommendations first, before closing your mind.
This may be the crux of the relationship. If you trust enough to listen, learn and try out suggestions that make sense, you have the basis of a good relationship. If you always need a second opinion, and your initial reaction is, “I think he’s full of &%*$”, then it’s likely time to move on.
6. Be reasonable
Reasonableness shows up in expectations of performance, knowledge and expertise in areas outside the advisor’s specialty.
Also be reasonable in your expectations of service level, based on the amounts of fees you are actually paying to the advisor. I have met many clients over the years whose advisor’s share of their management fees are only a few hundred dollars a year, yet they expect the kind of service they get at the Lexus dealer.
Finally, some good advice from another Dan, this one Dan Sullivan, founder of The Strategic Coach. His basic rules for advisors – which apply equally to clients – are:
- do what you say you are going to do;
- show up on time;
- say please and thank you.
I wish I had said that.
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David Christianson is a fee-only financial planner and investment counsel with Wellington West Total Wealth Management Inc.