Do You Have the “Right” Financial Advisor for You?

by W. Tedd Oyler, JD

www.teddoyler.com

We all have financial advisors, right? The insurance agent who handles your life insurance, your long-term care insurance, even your auto insurance, is a financial advisor. So is the attorney who drafted your will (you DO have a will, don’t you?). If you have somebody prepare your tax returns, then that individual or company is a financial advisor (like H&R Block, for example).  And, obviously, if you have a stockbroker, that broker is a financial advisor.

Clearly, that column is not written for everybody – if, for instance, you research the market to make the best long-term investment decisions for YOUR situation, and if you buy your insurance on the internet because you already know what’s best for somebody like you, and you did your own will with a kit you bought at Staples, and you already know how to plan for retirement and for your kids’ education, and, most of all, you already know ALL the income tax deductions and techniques available to you, then you are one of those fortunate few who can do it all yourself. 

But for those of us not so lucky, help is required. The problem then becomes: How does one choose the right sort of help? Some ideas:

Who pays your financial advisor?

It makes sense to understand how and by whom your advisor is being paid. If the advisor is paid via commissions, this means that he or she is paid based upon selling you something. While not necessarily “bad,” there’s a risk that the advisor’s interests in a particular transaction may be at odds with YOUR best financial interests. If the advisor is trying to sell you a product, then you must confirm whether his or her advice serves you or the advisor. 

Does your financial advisor take a comprehensive or segmented approach to planning?

Often, if you are working with a particular type of advisor, it is apparent that she can only use the tools in her “tool kit.” For instance, an attorney may see the solution to all your problems in the drafting of a trust, or an insurance agent may see every financial issue as leading to the need for more life insurance. There are plenty of scrupulous professionals available out there, so do not settle for one who is not looking out for you.

Does your financial advisor want to learn about you entire financial situation?

Beware of any financial advice from any individual who has not taken the trouble to learn about your entire financial life. What possible benefit can you obtain from a stockbroker who does not know or much care about your tax situation? Or your investment horizon? Or your estate planning goals? Or ANY of your goals for that matter?

Recently, I received a call from an acquaintance who sells investments, offering me an exclusive “deal” on some utility bonds. He has never asked about my tax circumstances, or my retirement plans or anything at all that would reasonably help him give me sound long-term financial advice. What he really wanted to do was to sell me something. My needs were unimportant to him. He was not providing financial advice. A true financial advisor takes the time to get to know you and your aspirations.  A true financial advisor then helps you to move towards YOUR goals, not his goals.

Remember that each element of your financial life – taxes, investments, retirement planning, estate planning or insurance – is but a part of an integrated whole. No single one of these areas can be well-served in a vacuum – each must be handled as part of an overall plan in concert with a trusted advisor or advisors.