There is no “one size fits all” financial advisor (aka, wealth advisor, financial consultant, investment manager, etc.). A great advisor for one client may not be best for another client. But, finding the right financial advisor is vital for investing purposes, navigating the ever-changing stock market and overall economy, and managing your portfolio.
William Huyler of West Chester, Pennsylvania, left corporate finance to help individuals receive personalized financial planning. As a financial advisor in Pennsylvania, Mr. Huyler has not only helped many clients improve their portfolios, he has also helped them find the best advisor for their lifestyle and financial goals. To find the right fit for you, Huyler recommends asking a prospective consultant the following questions in 2021.
Financial Advisor Qualifications
There are standard requirements for someone to legally call themselves a financial advisor or planner. Additionally, financial planners can fill one of three advisor roles, notes William Huyler.
Are you a fiduciary, broker, or both?
A fiduciary is legally bound to keep their client’s best interest at the center of every financial decision. Those considerations include commodity buying/selling, as well as service fees. Fiduciaries receive compensation from their clients directly — not through affiliate relationships with fintech platforms, insurance policies, or wealth portfolios.
On the other hand, brokers may act as financial advisors while receiving commissions through affiliate relationships. For example, they might recommend an investment portfolio managed by a third party that gives the advisor a commission for signing new clients.
While brokering may seem like a questionable way to do business, the reality is that it is acceptable, so long as the advisor is upfront about their role. Furthermore, clients on a budget can appreciate the lower advisor fees, since the advisor can receive a portion of their compensation from their professional relationships.
But it is crucial for clients to understand that some advisors try to do both, says William Huyler. These planners do some things as a fiduciary, but they will be a broker when the situation affords itself. In other words, these advisors may claim to be a fiduciary when in fact they are not a fiduciary 100% of the time. Advisors that try to do both can be dangerous, since they may go to great lengths to mislead their clients about whether or not they have the client’s best interest in mind at all times.
Are you a certified financial planner (CFP)?
Financial advisors and investment consultants can (and should) seek certification from the CFP Board (Certified Financial Planner Board of Standards, Inc.). Vocational certifications like the CFP Board provide industry accountability and verifies professional experience.
William Huyler on the Types of Financial Advisor
Most leading financial advisors work best with certain kinds of clients and investing. According to William Huyler, the following questions can help clients identify the best consultant for their financial needs in 2021.
What is your area of expertise?
Investment planners often cater to specific vocations, salaries, and investment types. For example, some financial advisors specialize in real estate investment decisions for those that want to manage properties. Other advisors are skilled with stock portfolios and hedge funds.
There are many financial planners that help middle-class wage earners plan for a modest retirement. Other planners serve those with more aggressive wealth-building goals and can help predict trends in the stock market and economy, says William Huyler.
Who is your ideal client?
This question is critical and relates to the question above. Managing portfolios for married, middle-aged families is much different than managing portfolios for a single 25-year-old. Knowing who a particular advisor prefers to assist will shed light on what kind of professional relationship one can hope to achieve with that advisor.
When identifying an advisor’s ideal client, one can ask about the following demographics:
- Family size
- Income bracket
- Size of existing portfolio
- Client financial goals
What is your full list of services?
Some financial advisors provide limited, nuanced services while others are “full service.” A full-service agency offers both risk management products and services (such as insurance policies) as well as proactive wealth-building products and services.
Neither one is better than the other. In many ways, financial planners that only do a few things tend to do them well. Those that provide exhaustive services are less likely to specialize. That said, full-service agencies (advisors) can simplify a client’s financial decision-making process and plan. It’s up to the individual to decide what works best for them and to confirm that the advisor that they choose will help them meet their financial goals.
Like any relationship — personal or professional — there does need to be synergy. “Bad vibes” between financial advisors and their clients can result in misunderstanding and distrust. One needs to feel comfortable with their financial advisor.
Can you explain [topic] in a way that I can understand?
The finance and investment industry are fraught with jargon. Many clients are afraid to admit when they don’t understand what their advisors are saying to them. Additionally, some advisors fail to consider all the ways in which they may patronize their clients.
One should feel comfortable asking their advisor to explain any part of their financial plan that feels confusing. When the financial advisor uses industry jargon, the client should speak up and ask the advisor to define their terms and speak clearly.
Top financial advisors refrain from using industry terminology (without fully explaining what a particular term means) or overwhelming their clients with unhelpful information. These consultants take great pains to make sure that a client’s financial and emotional needs surrounding their portfolio are met. This approach builds trust and reduces the risk of a client feeling surprised about a particular financial decision.
In the last major sell-off, how did your clients do and why?
In light of high unemployment and the effects of COVID-19 on the economy, it’s a good idea to ask the financial advisor about how they manage periods of volatility in the stock market, notes William Huyler. It’s unrealistic to expect that an advisor’s clients never suffer as a result of economic downturns, but it is critical that advisors be able to discuss how and why some clients suffered while others profited.
How do you make investment decisions?
Ray Dalio is perhaps the most successful financial advisor in the history of economics. In his book, Principles, Mr. Dalio insists that a decision-making framework is critical to industry success.
A decision-making framework is a set of values and criteria that helps the financial planner make good decisions. Some planners make important decisions on the fly, thinking that their intuition always pays off, says William Huyler.
But experience in finance proves that how one consistently makes decisions is often the key between success and failure. Seasoned financial planners understand this and they are more than happy to explain how they make their investment decisions.
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