4 More Qualifications Your Advisor Needs In Addition to Experience

This is part two of our series on qualifications your Advisor needs other than industry experience. For part one, click here.

Keep these in mind when meeting or choosing an Advisor, these qualifications are time-tested indicators of their competence.

Here are four more to look for:

1) Reduces your expenses

Costs, costs, costs. 

Earning 10% means little if you’re paying 1% in active management fees, 37% income tax as opposed to 20% capital gains tax, commissions on products, and all the other unnecessary costs you will incur if you don’t have your money managed as efficiently as possible.

If your advisor doesn’t know how to minimize your costs, their experience is an insufficient benefit.

2) Rebalances your investments

Preserving the optimal ratios between equities, bonds, and cash depends on your life goals. If you get outside what we call the Efficient Frontier, then an adjustment needs to be made somewhere to get you back in alignment. 

In essence, the Efficient Frontier optimizes the balance between risk and return. Get too far away from it, and your returns go down. Too much OR too little risk can produce an inefficient outcome, meaning you don’t gain as much as you should have. 

The simplest method for staying in line with the Efficient Frontier is to rebalance, because typically, equities will start to grow beyond a safe percentage of your liquid assets. This exposes you to unnecessary risk - equities feel great until the market crashes. Then, everyone wonders why they had so much money in equities.

Rebalancing reduces your exposure to risk. And quarterly rebalancing is optimal. 

Many advisors wait too long to rebalance, if they do it at all. Does yours? What’s in it for them? If they do rebalance, what is guiding them in how they do it? Do they have a system that eliminates emotion, gut instincts, and peer pressure from Wall Street “experts” from the decision-making process?

3) Not bound by industry norms

Performance-based thinking is one example of an industry norm. And we have a lot more to say about that in the next warning sign. 

The key to understand is this: Wall Street exists to make money for itself, not for you. So if we employ the tactics espoused by Wall Street, the only thing we know for sure is that Wall Street will make money. They make money no matter what happens to you. 

4) A true fiduciary – acts in your interests and discloses any conflicts of interest

Businesswire had this to say about fiduciaries:

“Some advisors receive commissions or other product-based compensation when they steer clients into particular investment products (including mutual funds, annuities, and variable annuities). This is a clear conflict of interest and can indicate that the advisor is not, in fact, a fiduciary. Make sure your advisor is providing unbiased advice, and not simply selling you investment products.”

Let’s be clear about this. It’s not as if your advisor is either a fiduciary or a crook. Non-fiduciary advisors still try to do what’s best for their clients. But they’re also doing what’s in their own interests, or those of their company. They’re trying to serve multiple interests at the same time. 

Sometimes, everyone wins. Other times, one or more parties loses. Rarely does the company lose. 

Greg Smith wrote a famous op-ed and then followed it up with a book titled “Why I Left Goldman Sachs.” If you want to learn from a firsthand source how it feels to be highly respected and yet racked with conflicts of interest, this is a great book to read.

A registered investment advisor operates as a fiduciary, meaning everything we do must be in the best interest of the client. A broker-dealer, on the other hand, operates on the ‘suitability’ standard, meaning what they advise must merely be suitable to your needs. In other words, it could work, but they aren’t bound to make sure it does.

I cannot overstate the difference between these two. 

When you’re looking for someone to manage millions of dollars you’ve spent a lifetime working for, you can’t risk entrusting it to anyone who does not put your best interests first at all times and in all decisions.

The stakes are just too high. 

There isn’t any one reason to choose a particular wealth manager or another. There are at least seven as you’ve just seen (and as you’ll see in a bit – many more than that).

You don’t want someone who can check off a couple of these items. You want someone who can check them ALL, add more to the list that you didn’t even realize you wanted, and check those too. 

Your future is worth that level of service.

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And that does it for our series on qualifications your Financial Advisor needs other than experience.

For more in-depth tips on choosing financial advisors and securing your generational wealth, click below to download our free ebook:

“Te Ultimate Guide To Choosing The Best Financial Advisor For Investors With $3 Million To $70 Million In Liquid Assets”

In case financial security and serenity are on your mind and you’d like to have an honest, no nonsense or selling involved, chat with an unbiased fiduciary expert then feel free to reach one of Pillar’s co-founders, Hutch Ashoo or Chris Snyder, at 1(800) 669-6780.