by Jack Waymire
Financial advisor reviews and financial advisor ratings that measure their quality are finally here. In the past, too many investors have been the silent majority. Bad financial advisors damaged them and they had no quick, effective way to warn other investors. Now, investors have a voice. They can use review and rating websites to help each other avoid bad advisors in their communities.
Top Ten Criteria
The ten criteria in this article cover the key elements of your relationships with personal financial advisors. Your ratings for multiple criteria can help investors avoid advisors who have the same weaknesses as the advisors they fired.
This general criterion covers your overall relationship with the financial advisor. Did the advisor act in a professional manner? Were you treated the way you wanted to be treated by the advisor and his staff? Were there any actions or inactions that made you feel uncomfortable? Was the advisor slick or professional?
2. Financial Knowledge
All advisors claim to be financial experts. They know that is what you want to hear when you select an advisor. Do you believe this statement was true or was it just a sales claim? Could the advisor answer all of your investment questions? Do you believe the advisor was a real financial expert? Did you have instances when you believed the advisor did not know something that he should have known?
3. Business Ethics
A high percentage of investors are impacted by what they don’t know about advisors. There are three key questions about ethics. Do you believe the advisor told you the complete truth during the sales process? Do you believe the advisor always put your financial interests first? Were you surprised by any hidden conflicts of interest?
4. Investment Performance
Most advisors use performance to sell investment products. There is no documentation in the form of a track record. This makes it easy for financial advisors to create excessive performance expectations. There are three performance questions. Did the advisor’s actual performance match the expectations that were created in the sales process? Were you satisfied with your overall performance? Did you have access to performance data after all expenses were deducted?
5. Risk Management
There are three questions. Did you communicate your tolerance for risk (large losses) when you hired the advisor? Do you believe the advisor stayed within your stated tolerance for risk? Did you ever experience negative returns that you thought were excessive?
6. Investment Expenses
There are three investment expense related issues. Did the advisor fully disclose all of the expenses you would be paying in writing? Do you believe you paid reasonable expenses in relation to the services and results that you received? Did you have any surprises – expenses you did not know about?
7. Communication Skills
There are also three communication issues. Did the advisor use jargon you did not understand? Did the advisor describe investment processes that you did not understand? Did you ever feel the advisor was talking down to you?
Meetings cost advisors time and money. Could you schedule timely meetings with your advisor? Was the advisor always on time? Was the advisor prepared to provide the information you asked for? Did you ever feel like the advisor was doing you a favor by meeting with you?
There are five report issues. Did you receive a performance measurement report? Was the report provided in a timely manner? Was the report easy to understand? Did the advisor provide additional reports that explained what happened to your assets (investment returns) and why? Did the advisor provide a written outlook for the future?
There is a bottom-line to every financial advisor relationship. Did the advisor meet your expectations for value? Did the advisor create excessive expectations during the sales process? A high percentage of advisors use undocumented sales claims to create expectations that help them sell investment and insurance products.
You may have mixed ratings (1-5 Stars) for the ten advisor criteria. You can create an overall score by answering one more question. Would you, without reservation, recommend this advisor to your family, friends, and associates? Your response says a lot about your overall opinion of the quality of this financial professional.
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