A BOLD STEP IN CHOOSING A FINANCIAL ADVISOR

A university student interested in financial planning came to my office to discuss the industry. He asked, “What is the most important thing for me to do to prepare to be a financial advisor?” He listed the potential classes he might take, and internships that were available to him, trying to give me a bigger picture of his options.
 
I asked him to consider the other areas of his life where he might need to hire professionals, and what qualities would be important to him. He mentioned several items but ultimately it came down to his answer that he would hire someone who had shown by his own experience, expertise in the field in which he worked. I asked if he would hire a contractor who lived in a run-down home and he agreed that he definitely would not.
 
With this question I had set him up for part two. I asked him to tell me about his own investment account and personal financial plan. He laughed and reminded me that he was a starving student without a spare nickel to his name.  His answer was fair but I told him he could not expect to advise others on financial matters in which he had no personal experience. I encouraged him, no matter how small, to get started investing and learn by his own experience so that he could teach others.
 
I have often been frustrated with the financial planning industry. Although regulators are working on a uniform code of conduct, there are currently very weak standards that govern who can call themselves financial planners. I think this needs to change.
 
People often ask how to select an advisor. Obviously, education and certification are required pre-requisites (only 15% of financial planners are Certified Financial Planners®).  But I would like to recommend another step, a bold step. When a potential financial advisor is interviewing you and asking lots of financial questions, turn those questions around. I believe clients have a right to know that the advisor has his/her own house in order. Advisors need personal experience and success in the areas they will be advising you in. You would be surprised how many there are who call themselves financial advisors but have little or no personal investments. The thought is absurd and scary.
 
Some years ago at a seminar I surprised the audience by posting my own investment allocations on the screen. I wanted them to know that I had personal experience in the things I was teaching them. I would like to see the regulators add a requirement that all who advise others on their investments be willing to disclose, at least at some level, their own personal investing experience and allocations. If you are looking for an advisor, don’t be afraid to ask them some personal questions. This is your life’s savings and you have the right to know the person trusted to manage it has their own financial house in order.