For both wealthy investors or those just starting out, how to find a financial advisor – one that is right for you and your situation – is more than just looking at credentials. The key to a successful partnership is finding someone that fits both your needs and your comfort level.
All too often, we do not ask ourselves whether the financial advisor or financial advisory firm we have hired is truly compatible with what our long term goals are. Or, folks rely on brokers and family friends to handle investments.
Dirty Secrets of Financial Advisers and How to Protect Your Portfolio
“It’s shocking to people to find out that the one thing that they think their advisor is trained on, they’ve never been taught—and that is, how to construct and measure risk in a portfolio,” Ed Butowsky argues in his new book, Wealth Mismanagement: A Wall Street Insider on the Dirty Secrets of Financial Advisers and How to Protect Your Portfolio.
In the book, Butowsky provides a firsthand look at some of Wall Street firms’ practices.
And as you can guess from the title: It’s not always a pretty picture.
Butowsky points to the failure of big brokerages to train brokers on skills such as how to construct portfolios and measure risk. One key takeaway is not to rely on a broker to manage your financial assets and make sure your legacy is taken care of.
How to Find a Financial Advisor or Firm and the Difference in Finding the Right One
Some people opt for a single financial advisor who works for him or herself. Others opt for a full-service financial management firm, like Stableford Capital. At a full-service firm, you can have easy access to financial services like tax services, retirement planning, estate planning, investment management and trust services.
Either way, there are some questions to ask before proceeding.
Questions to Ask When Finding a Financial Advisor
What is your specialty?
Some financial advisors work with retired individuals, and help them with their estate planning. Others work with younger, entrepreneurs who are dealing with the issues of new wealth and tax planning.
Are you a Fiduciary?
A fiduciary must follow a higher standard of ethics when it comes to finances. A fiduciary obligation means no conflict-of-interest concerns – ie – is the financial manager who gets a commission or bonus for promoting, selling or buying equities, bonds or funds.
What is Your Strategy?
A simple, but loaded question. The financial advisor might have a personal bias towards investing in a set way that may not fit with your needs or wants. If you are very concerned about fluctuations in the markets, and want to make safety your priority – then make that clear and ask the advisor about the risk management measures and process. If you are open to risk with some monies set aside for a little financial exploration, then work that out with the advisor first.
Tell me about your Credentials and Training
As discussed in Butowsky’s book – sometimes just having the credentials as a broker does NOT mean that your financial advisor is qualified. If it’s a firm, ask about the training required for all the professionals who will be assigned to help you.
In the end, Butowsky is wary of the big brokerages move to more holistic planning as he sees it as a way that, “they can look for cross-selling,” while the portfolios he analyzed had, “a lack of diversity”. In fact, “ninety-seven and a half percent of retail portfolios do not have alternative investments. And it’s mathematically impossible to have an efficient portfolio without alternatives because everything else is so highly correlated,” explained Butowsky.
At Stableford Capital, you can take advantage of working with a firm who partners with you and whose integrated services and customized portfolio construction options help to ensure that your entire financial picture is aligned with your best interests.
To review your portfolio and find out more about our integrated services and partnership approach, contact Stableford at 480.493.2300 or email us at [email protected].