Today I’m bringing you a little excerpt from a brand new article over at BudgetsAreSexy.com, and it is now officially one of my all-time favorites. The author is actually Shannon McLay from Financially-Blonde.com, and she absolutely nails it when it comes to one of the biggest and most hard-hitting questions you can ask a potential financial advisor.
Normally I would jump in here and give you an intro to that, but I’m going to save my comments for the end instead, because I think you’ll enjoy Shannon’s insights, unfettered, first.
On just about every financial website available, there are many articles about the questions you should ask your financial advisor. And typical questions include the following:
- What is your investment philosophy?
- How do you get compensated?
- How much money do you have under management?
- What services does your firm offer?
- How frequently should I expect to hear from you?
And let me let you in on a little secret, most of these questions were created by financial advisory firms and they specifically train their advisors on how to best answer these questions. In fact, we had weekly role-play dialogues where we were trained in the best responses to these questions. So if your advisor has a great answer to your question, it is because he or she has been trained to answer it.
“How do you invest YOUR money, and can I see your portfolio?”
You will get lots of responses, I am sure, and here is how I would respond to some of them:
Advisor Response: “My compliance would not allow me to share that with you.”
My Response: “BS, that’s a lame excuse and you are just a chicken. What are you hiding?”
Advisor Response: “I don’t have money invested right now.”
My Response: “Really? Is it because you don’t have money or you are sitting on the sidelines with cash?”
If they don’t have money, run away. I don’t think an advisor has to have millions of dollars but just like I wouldn’t hire a pediatrician who doesn’t have kids, I wouldn’t hire an advisor who doesn’t have any money. Even a little in a 401k or IRA is better than nothing. If they are sitting on the sidelines with cash, why are they advising you to jump in when they are sitting out?
Advisor Response: “All of my money is tied up in real estate.”
My Response: “You just talked about asset allocation for 30 minutes, do you not take your own advice?”
Advisor Response: “Well I have different goals for my money than you.”
My Response: “Yes, and different goals would just suggest different percentages of asset allocation not completely different assets.”
Advisor Response: “I will gladly provide you with a statement of my holdings and I will white out the dollar amounts.”
My Response: “You are hired.”
Hedge fund and private equity investors require that their fund managers have money invested in the fund before they commit to investing in it. If this is a good rule of thumb for people with millions of dollars to invest, why shouldn’t it be a good rule for people with thousands of dollars to invest?
Advisors will tell you that no one should care more about your money than you. These are the advisors you want to invest alongside with because he or she clearly cares for their portfolio the most. Your relationship with your financial advisor is similar to that of your spouse, and if you can’t trust them and feel comfortable knowing you are on the same team together, then why get married to begin with?
Keep this in mind the next time you sit down with an advisor. It may feel a bit awkward asking at first, but remember – it’s your money. And nobody cares about it more than you.
Again, very impressed with Shannon’s insight here, and hope you enjoyed it. As a long-time advisor, I can vouch for her wisdom here, and I wholeheartedly encourage you to check out the rest of Shannon’s post at the link below.
In addition to her insight on that one big question, I also very much appreciate her candor in discussing sleepless nights related to managing other people’s money — something any top notch financial advisor should admit to. You need to care about the people you’re representing to do the most effective job (I don’t care what anyone says on that, it’s the truth), and as someone who’s been called out on that unjustly before, I feel it’s a position completely worth defending. You’re not just focused on money. You’re focused on futures, for both your clients and their families, and it’s a responsibility that a great financial advisor will never take lightly.
Please keep that in mind as you move forward, and thanks again for reading!
Credits: One Question to Ask Financial Advisors | Budgets Are Sexy
