Financial Advisor Service Offering

On 09/14/2012, in Financial Advisors, by Jordan Wilson

A third question to ask a potential financial advisor is, “What services do you offer?”

The goal is to find a match with your current and (realistic) future needs.

A secondary goal is to match the offering depth to your needs as well.

What do I mean? 

Current Needs

You want to choose a financial advisor who can handle your current requirements. If not, it should be a non-starter.

If you want someone to prepare complex personal tax returns and business restructuring, you need to find an experienced tax professional. The world’s best investment analyst, insurance provider, or cash manager will not be what you want.

However, if you want to focus on life insurance, then the tax professional is probably not the best fit. Instead you will want to deal mainly with an insurance specialist.

Individuals are unique. An advisor who is best for your friend, might not be optimal for you. Determine your key needs and make certain that potential advisors can adequately cover them. If they cannot, walk away.

The key word is “adequately” (or competently or professionally) cover your needs. I preach cost minimization, but often you get exactly what you pay for.

One friend of mine tried to save money on his divorce and went with a low-cost friend of a friend lawyer. 22 years later he is still paying for the “savings” on legal fees.

Seek value (in competence and service level) for the cost, not simply the cheapest option.

Note that when I say advisors, I include both the actual advisor as well as his or her support structure. You want to be able to seamlessly access support for all your needs. It may be from one person or it may be via an entire office of workers or a network of third parties.

Realistic Future Needs

Sure you may murder someone down the road. It is a possibility (especially if you know my nephew). But what is the probability? You can put the top criminal defence lawyer on retainer, but is this a realistic expenditure?

You need to assess the services offered against reasonable expectations of future requirements.

If you really need someone to develop and help execute exotic derivative trades, then deal with a high end investment advisor. If you plan on investing in simple index mutual funds, do you need to hire a specialist in complex strategies?

Remember, the more skilled the professional, the higher the charge rate. So try not to be paying for more expertise than you realistically expect to require.

Someone to Grow Old With You

Think about the areas you will likely want assistance with over the next 10 to 15 years.

Many young investors initially seek help in designing cash flow and basic investing programs, normally with consideration of general tax issues. Insurance, major purchases, income splitting, marriage, children, etc., might not be key considerations for those in their 20s. But it is highly probable that these issues will arise in the not too distant future. So I suggest you factor in these, and other likely issues, when choosing an initial advisor.

Yes, you can change advisors over time as your needs evolve. Many individuals do this. However, I think if you can develop a long-term relationship with a competent advisor (or firm), there are definite synergies in dealing with someone who knows your personal situation over an extended period.

Bottom Line

When assessing services offered by an advisor, you definitely want someone who can competently meet your present needs. Preferably at a level equal to your requirements and you do not pay for more skills and experience than you need.

You also want an advisor whose service offering can meet realistic future needs. That allows you to develop a long-term relationship with a single person or firm. Something that I believe can add substantial value to your wealth management over time.

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