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Finding the Right Financial Advisor for You

To find the right financial advisor for you, it is imperative to first know what a financial advisor actually does.   An internet search of that phrase will yield thousands of links to pages of advisory firms selling products or services.

Some of them are actually pretty good; meaning that what they do and how they do it have withstood the test of time. Time here is defined as generations. All of them are going to charge you for the products and services you buy. The good news is that you have 100% control over the financial advisor you choose.   The better advisors will cut through the hype and guide you through the seven primary, equally important, factors historically known to successfully influence how happy you are with your money:

“If you don’t know where you are going, any road will get you there.” — Lewis Carroll

Find an advisor that understands what inspired you to become who you are in the world, the challenges and triumphs you have faced along the way, what you want for the future and why you want that future. Proper financial planning integrates achieving what you want for the future into how you live your life currently.   This has an immediate, beneficial impact in several important areas:


  1. Managing income effectively helps you understand how much money you’ll need for monthly expenditures, investments and taxes.
  2. Cash Flow. You can increase your cash flow by carefully monitoring spending patterns and expenses. Budgeting will help you keep more of your money.
  3. Increasing cash flow increases your capital by allowing you to invest money you don’t spend into money for growth.
  4. Setting measurable financial goals, understanding the effects of decisions, and continually reviewing results provides a whole new approach to your budget and improving control over your financial lifestyle.


Most people spend more time on binge-watching “Breaking Bad” or playing a round of golf instead of planning on who will inherit their estate. Estate planning isn’t a cakewalk, but without it you can’t choose who or what gets everything for which you have worked so hard, in some cases a lifetime.

Estate planning isn’t just for Daddy Warbucks or Mark Zuckerberg. If you are a breadwinner, then you need to plan for the time that you are not. Whatever you leave behind; property, financial assets, etc. if you don’t decide who receives the property when you pass away, you won’t have any control as to what happens to the property. Without an estate plan, the courts will decide who gets your assets. A court won’t know your wishes concerning your heirs. Don’t rely on a court to rule that the surviving spouse gets everything.

The right financial advisor for you will help you prepare for the unthinkable. If you and your spouse were to die unexpectedly before the children turn 18, who will raise your children in a manner with which you approve? Without a will, the courts will again step in.

The right advisor will ensure that assets transferred to heirs will be done by creating the smallest tax burden for them as possible. That’s a big part of what estate planning is. Even elementary estate plans can reduce much or even all their federal, state and inheritance taxes.  In addition, an estate plan will put you in control of who controls your finances and assets if you become mentally incapacitated or after you die. This can mitigate family strife and make certain that your assets are handled in the way that you intend.

Once the plan is made, have your advisor write an Investment Policy Statement (IPS).   An IPS is an agreement between an advisor and a client that outlines the general investment goals and objectives of a client and describes the strategies that the advisor should employ to meet these objectives.  In addition to specifying the investor’s goals, priorities and investment preferences, a well-conceived IPS establishes a systematic review process that enables the investor to stay focused on the long-term objectives.

“Risk comes from not knowing what you are doing.” – Warren Buffet

Of primary concern for most people is the loss of their money.   Find an advisor that first protects you against risk, and then seeks a return. Remember, it is the return OF your money before the return ON your money. Capital preservation must be the focal point of the investment portfolio the advisor has created specifically for you.

Risk tolerance is highly personal and allows you to offset some level of investment return in exchange for greater comfort. It’s a question of wanting to eat well versus sleeping well. Do you drive in the slow lane or the fast lane? Each person is wired differently when it comes to accepting certain risks. Knowledge can re-wire one’s acceptance of risk. Your current risk tolerance is directly correlated to what has gone into your mind.   You can change your tolerance for risk through learning. In other words, changing what goes into your mind.   Improving your tolerance for risk, by knowing more about what you are doing, can improve your investment returns.   Attitudes toward risk are shaped by age, important expenditures, when you need your money, your ability to earn an income, inflation, the cost of credit, and your dependents.

Asset allocation. “Don’t put all of your eggs in one basket.” — My Grandmother.

Asset allocation, (what your money invests in, and how much of your money is invested into any asset class), is a major component of portfolio performance and volatility. Find an advisor that takes a long-term, strategic approach to investing.   Keeping an investment discipline over long periods of time and market cycles offers the best opportunity to achieve your wealth objectives.

Detailed, forensic research that studied the performance of a multitude of American corporate pension plans showed that the strategic mix of stocks, bonds, and cash accounts for more than 90% of a portfolio’s risk. The research also showed that pension plans lost an average of less than 1% in returns resulting from market-timing activities. The research further showed that an additional 0.36% was lost because of individual security selection such as stock picking. What this means is that the asset classes used and normal long-term weightings for each of those asset classes is demonstrably more valuable to performance than altering the asset mix to try and capture excess returns (market timing) or selecting individual securities in order to capture excess returns (stock picking).

“A penny saved is a penny earned.” — Benjamin Franklin

Costs matter when it comes to investment performance.   There is a reason why Harvard’s Endowment doesn’t own mutual fund A shares, annuities, and structured notes. The costs for universal, variable or whole life insurance products are at the high end of the spectrum. Find a financial advisor that understands that keeping the costs of your investments low means putting more of your money to work for you. This will allow you to use your wealth as an extension of what you want and truly believe.

When searching for the right financial advisor for you, look for an investment advisor that is bound to a fiduciary standard established under the Investment Advisors Act of 1940.   This law holds advisors to a fiduciary standard requiring them to put their client’s interests above their own, even at their own expense. The Act is highly specific in defining a fiduciary and stipulating that an advisor must place his or her interests below that of the client. The Act also demands a standard of care, meaning zero conflicts of interest.   For example, the advisor cannot buy securities for his or her account prior to buying them for a client, and is prohibited from making trades that may result in higher commissions for the advisor or his or her employer.

“The avoidance of taxes is the only intellectual pursuit that carries any reward.” – John Maynard Keynes

There are three ways to pay less in taxes: avoid, delay, and evade. Since tax evasion will eventually land you in prison, it’s smarter to look at the other two solutions.   Find a financial advisor that understands tax-efficient investing. This involves considering all taxing authorities in every investment choice made. Lowering or delaying the amount you pay in taxes, today, puts more of your money to work for your tomorrow.

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

The most valuable asset is time. It is also the most squandered.   Find a financial advisor that believes that putting money to work as soon as possible yields maximum returns.   The value of time on money, conceptually, is that money available now is more valuable than the same amount in the future because the money you have now has potential earning capacity. This core principle of finance holds that, provided money can earn a return, any amount of money is worth more the sooner it is received. The earnings earn. This is referred to as compounding.

While the best way to grow your money is to start investing as quickly as possible, optimal portfolio design and asset allocation require a time horizon. In some cases, that can be perpetual. If you can estimate the length of time needed to reach a financial goal, then you can plan better and improve the likelihood of success to reach your goals.

Think of investing like playing with a yo-yo. The yo-yo goes up and down. Think of time as a staircase. As you walk up the stairs playing with the yo-yo, it will go up and down, but as you climb the stairs the lower height of the yo-yo will be on an upward trend.

A short time horizon has two obstacles: time limitations, and the possibility that your investment portfolio yo-yo suffers an unexpected drop. By contrast, when you have a long time horizon, you have the opportunity for greater returns by virtue of compounding for a longer period.

“The four most dangerous words in investing are: ‘this time it’s different.’” – Sir John Templeton

According to research, the average investor in a blend of equities and fixed-income mutual funds has garnered only a 2.5% net annualized rate of return for a 20-year time period. The average annualized total return for the S&P 500 index for the same period of time is 9.2%.

Who is the average investor? In this research, the average is defined as the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. This universe would include small and large investors as well as professionally advised and self-advised investors. In other words, just about everyone.

Why does the average investor underperform?

Investors may only have themselves to blame. According to research, investors make poor investment choices that hurt their investment returns. These decisions are often driven by emotion. Therefore, it is imperative to find a financial advisor that uses the Investment Policy Statement referred to earlier to control your behavior as well as his or her own behavior when executing your financial and estate plans.

Conventional wisdom suggests that investors are rational. They seek to maximize their wealth through objective investment decisions. That makes sense. However, the emotions of fear and greed, along with herd instinct, have long been thought to be the main drivers of markets and investor behavior and lead to irrational investment decisions.

For example, beginning in March 2000, investors purchased the largest amount of mutual funds in the history of the stock market. Fast forward to 2008, just before the “Great Recession” market downturn and stock prices were falling. Investors refused to sell at a loss. As the market continued to fall, investors held off exiting the market until they simply couldn’t take it any longer. Many sold their investments near the bottom and missed the current upswing that began March 2009.

What many investors do not realize is just how difficult it is to make up that loss.  A 50% loss requires a 100% gain just to break even.

Investing your own money is a very difficult thing to do. To properly invest, you need to emotionally detach yourself from your money. This is equally true of your financial advisor.   Advisors are human and have similar emotions. Quite often, investors find themselves second guessing their advisor and searching for another.  As markets head back up, the investor feels satisfied with their new advisor—until the next downturn.

Aligning your values, perspectives and decision-making patterns with the right advisor can leverage those qualities so you can live your life, and use your wealth as an extension of what you want and truly believe. Doing so will ensure that you are constantly thinking in terms of the big picture: How is your total wealth portfolio doing and how is it doing over the long term? Distractions like the financial news and how other investors are performing doesn’t matter and is unlikely to make you a better investor.

Need help finding an advisor that understands your unique financial goals?

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