Most investments are made with a long-term time horizon. It makes sense that your relationships with your financial advisor should be long-term as well.
Building a long-term relationship with your financial advisor lets them better serve you. They’ll be able to provide more personalized financial guidance, basing their recommendations on a solid understanding of your financial position and goals. They’ll continually monitor your investments, so you can take action whenever it’s prudent to. Every way they assist you can likely be improved by having a strong relationship.
That’s not to say building a relationship with a good financial advisor is easy. You first need to find an advisor who’s a good match for you. It then takes some time to build the trust and rapport that’s necessary for the relationship to work well.
At Invested Better, we seek to make finding a good financial advisor easier. We can help you find an advisor by completing a short form (just a few questions). We also have some tips on what to look for in an advisor, and how you can help them serve you.
Qualities of Your Ideal Financial Advisor
Your financial advisor needs to know finances, but that’s not the only thing they need. It’s important that your advisor is communicating with you, working for you, and knowledgeable in their field. Here are some qualities to look for.
Fiduciary Advantage
The easiest qualification to check is whether your financial advisor has a fiduciary duty to you.
Being a fiduciary means that an advisor is legally obligated to put your interests ahead of their own. They’re bound to serve you, even if there’s an apparent or real conflict of interest. Failing to uphold this duty can come with both liability and legal consequences, so it’s something that’s taken quite seriously.
You should ask whether your financial advisor is a fiduciary. Not all advisors are, and compensation structures can create potential conflicts of interest. By using an advisor who’s a fiduciary, you can trust that they’re obligated to act in your interest even if there’s another incentive for them.
To find out whether a financial advisor is a fiduciary, simply ask them or their assistant.
Clear and Consistent Communication
Having expertise isn’t helpful if your financial advisor doesn’t effectively share their knowledge. Effective communication is paramount in a successful financial advisory relationship.
Effective communication starts with regular contact. You should be updated on portfolio performance, major market changes, and whenever there’s something else of note. There also should be periodic one-on-one check-ins, although the frequency of these might depend on your investment strategy and savings plan.
Hopefully, your advisor offers several options as to how you receive communications from them. You may prefer getting messages via email, an online platform, text, phone call, or physical mail. They’ll likely contact you different ways for different purposes. For the routine messages, at least, find someone who’ll communicate via the method you prefer.
Communications often involve explanations, and those should be easy to understand. Your financial advisor should share their knowledge in a way that helps you understand, and they should be willing to answer any questions you have. You ought to feel comfortable learning from them, and asking whenever things aren’t quite clear.
You can ask an advisor how often they send updates, and how those updates are sent. You can also try contacting them with a question outside of an official meeting, to gauge how quickly they respond when you have a query or concern.
Investment Expertise
Your financial advisor needs to have expertise in financial matters, particularly investing. This involves understanding your risk tolerance, time horizon, and financial goals. Investment accounts, investment strategies, and specific assets can be recommended based on your preferences and considerations.
First, look for credentials that show a certain level of expertise. The following are some common and some more specialized certifications:
- CFP: A Certified Financial Planner is well-versed in all areas of financial planning, including stocks, bonds, insurance, retirement planning, estate planning, taxes, and more.
- CFA: A Chartered Financial Analyst is well-versed in many areas of financial planning, including portfolio management, securities (stock and bond) analysis, economics, and accounting.
- ChFC: A Chartered Financial Consultant is well-versed in all areas of financial planning, including stocks, bonds, insurance, retirement planning, estate planning, taxes, and more.
- CIC: A Chartered Investment Counselor has specific knowledge in portfolio management. This is a more specialized designation.
- CIMA: A Certified Investment Management Analyst has specific knowledge in investing, including asset allocation, risk measurement, investment strategy, performance metrics, and conducting due diligence. This is a more specialized designation.
- CFS: A Certified Fund Specialist has specific knowledge of mutual funds. This is a more specialized designation.
- CMT: A Chartered Market Technician has specific knowledge in technical analysis, which is a metric-based investment method. This is a more specialized designation.
- PFS: A Personal Financial Specialist is a Certified Public Accountant (CPA) who has undergone additional training. This is a more specialized designation, and mainly focused on taxes and accounting.
- CLU: A Chartered Life Underwriter has specific knowledge in insurance, including health insurance, insurance law, and life insurance. They’re also knowledgeable in income tax, investing, and financial planning. This is a more specialized designation for financial planners who focus on insurance.
Your financial planner might have one or several of these designations. For specific investing knowledge, you might ask about CIC, CIMA, CFS or CMT certification. They may have a CFP, CFA or ChCF designation as well, or something similar.
If you’d like to connect with a financial advisor who has specific investing knowledge, use our financial advisor matching tool. Answer a few brief questions, and we’ll pair you with someone who has investment knowledge that’s relevant to your situation.
Holistic Financial Planning Approach
Financial planning isn’t solely about investing. A good financial advisor will take a holistic approach, assisting with retirement planning, estate planning, tax strategies, and potentially insurance. Understanding how to invest requires understanding these other financial areas.
Ask about an advisor’s services and knowledge. Someone who’s a CFP, CFA, or ChCF should be well-qualified to assist in all areas of financial planning.
You can find a financial advisor who offers extensive services. Based on a few brief answers, we can pair you with an advisor whose services should match your needs.
Your Role in Building a Strong Partnership
Every successful partnership is a two-way relationship. Taking an active role will ensure your financial advisor is able to effectively help you. Here’s what you can do for your side of the partnership.
Open Communication is Key
Open communication with your advisor is crucial. Be candid when sharing your financial goals and concerns, and let your advisor know when something changes. Contact them with any noteworthy updates, and always be honest in your questions and answers.
The more your advisor knows about your financial situation and objectives, the better they can tailor their advice and recommendations for you.
Keeping Your Advisor Updated
Your advisor isn’t the only one who should be reaching out when there are significant changes. financial situation. Inform your advisor about any major changes financial or otherwise. Marriage, divorce, the birth of a child, a job change, an inheritance, and other major life events can all impact your financial planning.
Sometimes clients are tempted to avoid talking with an advisor when things don’t go well. Make sure you still update your advisor when there’s a major event that negatively impacts you, and answer their calls even if your investments are temporarily down. Advisors are there to help when things are difficult, but they need to hear from you.
The more your financial advisor is aware of your situation, the more they can help.
Discussing Challenges and Concerns
If you have any doubts or concerns about your financial plan or investment decisions, don’t hesitate to discuss them with your advisor. You should feel comfortable questioning them about investment advice, sharing your retirement or college savings worries, and anything else that’s bothering you.
You hopefully feel comfortable sharing such concerns with your financial advisor. It’s a clue that you might need a different advisor if you aren’t comfortable discussing. In that case, consider finding a new financial advisor who’ll listen well.
Preparation for Meetings
To get the most out of each meeting with your advisor, come prepared. Bring any relevant documents, have a list of questions prepared, and share what you’d like to discuss beforehand. Your advisor will be better able to discuss matters in detail if they know what your goals for a meeting are.
Being prepared will ensure productive discussions, and make the most of your meetings together.
Find Your Qualified Financial Advisor Now
Successfully working with a financial advisor is like navigating any successful relationship with someone.
You first need to find the right person, which is where we at Invested Better can help. We’ve networked with many qualified financial advisors, and can recommend someone who’s a good match for you. Let us know what you want from a financial advisor, and we’ll let you know who’s probably a good fit. It takes just a few minutes to get started finding an advisor.
Once you have an advisor, the relationship is a two-way street. There should be open communication from both sides, sharing questions and answers, and ultimately arriving at financial planning decisions that’ll help you toward your goals.
General Disclaimer: The information provided on this site is for informational purposes only and should not be construed as financial advice. Invested Better does not guarantee the accuracy or completeness of the information provided. Please consult with a licensed financial advisor before making any financial decisions.
Investment Risk Disclaimer: Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
