Finding Advisors is Easy - Determining Their Quality is Difficult

Finding financial advisors and financial planners is easy. They seem to be on every street corner now that bankers, accountants, and insurance agents also sell investment advice and products. Contacting them is easy too. They call you. They belong to the same organizations that you do. Or, they are referred to you by someone you trust. The problem is not all advisors are competent and ethical. The financial services industry is afflicted with a huge range in advisor quality. This undisclosed range creates a major financial risk for you. Select the wrong advisor and you will lose a lot of money.

The selection process is tough because financial advisors use finely honed sales skills and processes when they market investment services and products. For example: they find you, they develop rapport, they determine your asset amount, and they convince you to buy their products. These same sales skills make them sound like investment experts even when they are not.

Your Challenge

All advisors claim to be financial experts because it helps them sell investment products. Their sales pitches also contain other unsubstantiated claims: “I can produce superior results for low risk”, “My only purpose is to help you achieve your financial goals”, and “Your financial interests always come first”. These claims aren’t true 90% of the time.

Your challenge is to determine the quality of financial advisors and financial planners before you buy their products or follow their advice.

Track Records

Money managers provide audited track records so you know their past results. Financial advisors don’t provide any documentation for the results they “say” they produced. In the absence of track records, they can say whatever helps them sell you their products. Also, in the absence of documented track records, you have no way of determining the results of their advice.

Control of Information

Advisors use sales skills to control the information you use to select them. This process also has consequences for you. You only hear what they want you to hear. Any information that detracts from their sales successes is deliberately omitted. Misrepresentation and omission are two deceptive sales practices that are used by less ethical advisors.

Selecting a Real Expert

If you want to select a real expert you have to use an objective process that you control. You also have to minimize the impact of the financial advisors’ personalities and sales skills. And, you have to control the information you receive from advisors. When you are in control, advisors should be required to provide information that describes:

• Credentials that help you determine their competence
• Ethics that help you determine their trustworthiness
• Business practices that help determine how they will treat you
• Financial services that will help you achieve your financial goals

Documentation

By now you know it pays to discount what financial advisors say when you select them. Verbal information is also called a sales pitch that’s easy to misrepresent and deny later when it’s your word against the advisor. Any information that’s going to impact your decision must be provided in writing so it’s easy to compare advisors to each other.

Higher quality advisors won’t have a problem providing documentation for the information you want. Lower quality advisors will resist providing written information because they don’t want you to have a written record of their weaknesses. If you did, you wouldn’t buy what they are selling.