Broker Check
Picking Your Financial Professional

Picking Your Financial Professional

December 19, 2023

Use your best comparison-shopping skills when choosing a financial professional

Many financially successful people are comparison shoppers. If you’re one, you pore over ratings in consumer magazines, read websites for reviews and compare scores of products before you buy even everyday products like coffee or toilet bowl cleaner.

Yet chances are good you don’t use that same care when choosing a financial professional to manage your life savings. Maybe you should.

Beware of Marketing

Not surprisingly, it makes sense that many financial professionals carve out a niche and become the perceived specialist in a specific area. Unfortunately, lack of specialized knowledge in such an area doesn’t disqualify a financial professional from using the marketing spin to great advantage.

Notice, for example, how many professionals tout a specialty, such as women or couples. In other words, pay attention to marketing messages, but make sure you confirm expertise beyond catchy taglines on websites or brochures.

Investment Philosophy & Returns Matter

Other factors to think about include:

  • Overall investment strategies;
  • Historical and verifiable investment returns;
  • A wide range of investment options; and
  • Similar values.

Certainly, investors need to pay attention to a financial professional’s investment strategies and historical returns. There is a big difference between professionals who are deeply committed to a passive, buy-and-hold strategy and those who’ve developed intricate models of timing various markets.

You must also remember that anyone can overstate or manipulate both investment strategies and returns – so make sure the historical returns are audited by a reputable third-party.

Just as important, does the financial professional represent a broad selection of investment options? In many cases, the selection stems from just one mutual fund family, insurance or annuity company or retirement plan professional.

Your Values Matter

Discovering whether you and your prospective financial professional share similar values requires that you ask lots of questions, listen closely to the answers and get a sense of them as a professional and a person.

Realize too that some firms spend buckets of marketing money establishing their firm as competent, caring and trustworthy shepherds of your money. But remember: that’s marketing.

Financial services consumers often don’t notice the millions of dollars a firm pays in fines after regulators, like the Securities and Exchange Commission and the Financial Industry Regulatory Authority, notice behavior that’s opposite its advertised values.

Fees & Education Matter

How advisors are compensated is important to figure out too. Maybe they are compensated with:

  • Pure commissions; or
  • A combination of fees and commissions (fee-based); or
  • Only with fees (fee-only).

Beyond Marketing

You’ll do well to apply your best comparison-shopping skills when choosing a financial professional.

Learn to look past the marketing and assess what is more important: your financial professional’s training, integrity and historical (and audited) results.

And like anything else: it’s ok to trust. But make sure you verify.

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by FMeX.

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