What is safer? You can find a financial advisor on your own or you can select a financial advisor who finds you. The easy way is to select an advisor who finds you. If you go down this path you may be prone to selecting the advisor with the best personality and sales skills. Why? Read on to find out how you can avoid this major financial risk.
The critical issue that impacts you is not how you find a financial advisor. The real issue is selecting a competent, ethical advisor who can help you achieve your financial goals.
For the purposes of this article I am going to assume there are two types of financial advisors. Type I makes a living based on his knowledge and the quality of his financial advice. This professional has spent years accumulating experience and certifications that produce the knowledge he needs to provide high quality advice and services. High quality Type I professionals also have business models that minimize potential conflicts of interest and put the achievement of client goals first.
The Type II professional makes a living based on his sales skills. He uses his sales skills to convince investors he is a financial expert. And, because he is paid with one-time commissions he is constantly seeking new sales opportunities. He calls this process prospecting. If he cannot generate new prospects he will eventually have to leave the financial service industry that is notorious for its high turnover rate.
Based on the above descriptions, which type of financial advisor do you think finds you? You are correct if you said Type II. They are constantly prospecting for new clients. They may invite you to seminars that include a “free” lunch. Or, they are members of your church, country club, or social group. They are nice, pleasant people who are fun to be around.
You want a Type I advisor who may be intellectual, analytical, and quantitative by nature. They may not be as friendly as the Type II advisors because they are not salesmen. They are financial professionals who make their livings helping clients achieve financial goals. Because they are busy helping clients they may do little or no marketing. They don’t have time and most of them do not like the marketing process.
Type II advisors are going to find you using one of their prospecting strategies. You are going to have to find the Type I advisors on your own. You may ask your CPA or a family member for a referral. Or, you can use an online service like Paladin Registry to help you find a high quality advisor in your community.
It does not matter how you find the financial advisor. What matters is you select a high quality professional to help you achieve your goals. And chances are he is going to be quantitative and analytical.