I’ve worked with a handful of financial advisors over the years and I can honestly say I’ve never had a relationship with any of them until I connected with a fee only financial advisor. This shouldn’t be too surprising as many financial advisors (who are associated with a bank or investment firm) don’t exactly have the most knowledge, so all they’re really trying to do is meet their sales targets. I hate to generalize this, but it’s true.
Now, don’t get me wrong, there are many great financial advisors out there. Fee only financial advisors are the route I recommend, but I don’t doubt for a second that there are many advisors that work for a bank or investment firm that deeply care about their clients.
Regardless of who you’re working with, you need to build a relationship. There’s no point in working with someone if you don’t trust them or if you’re not being upfront with them. Here’s how to build a relationship with your financial advisor.
Be forthright with all your financial info
When working with a financial advisor, you need to be forthright with all of your financial information. For some reason, some people don’t like to disclose certain things but that makes no sense since this is your financial advisor. For them to do their jobs properly, they need to know your entire financial picture.
Even if you don’t think it’s important, you’ll want to tell your financial advisor so they can make the right investment choices for you. Let them know about any insurance policies you have, inheritances you may get, your current investments, investments with your employer and everything else you can think of. If something comes up later, tell your advisor!
Know how they get paid
No one works for free. If your advisor says you don’t pay them anything, then you need a new advisor. Although I don’t like financial advisors who work for certain companies since they may have affiliated products, I’m okay with them if they’re upfront about their fees.
Quite often part of their fees is tied directly to the products they recommend. Again, there’s nothing wrong with this if it’s the right investment for you, but you just need to know how your advisor is being compensated. You’ll also want them to tell you the management expense ratios so you know what you’re paying. Having full transparency with fees is one of the best ways to build a relationship with your financial advisor.
The reason I prefer fee only financial advisors is that I know exactly what I’m paying for. Asking your financial advisor how they get paid is one of the first questions you should ask them.
Be clear about your goals
Since your financial advisor is helping you plan for your future, you need to be clear about your goals. Your advisor will want to know things such as if you plan on buying a home in the near future or if you want to retire early. These goals of yours may affect what investments they recommend.
There’s nothing wrong if your priorities change, but again, you just want to let your advisor know. In my opinion, it’s never a bad thing to let your advisor know that you plan on making a large purchase. What I’m talking about are things that cost 5-digits or more. Your advisor could plug in the numbers and quickly tell you if you can afford it, and/or how that purchase will affect your other goals.
Ensure that they have your interests first
Not every advisor has a fiduciary duty to you. If they do, it’s not like they’re going to make a fiduciary pledge to you, but you’ll want to know that they’re looking out for you. This can be tricky if your advisor works for a financial institution or investment firm, but as noted above, they just need to be transparent.
The main goal here is to ensure that your advisor is selecting products that make the most sense for your goals. If they’re choosing things that give them the biggest commission, they’re clearly not looking out for you.
Make sure they can explain everything in plain English
When it comes to your investments, you want your financial advisor to be able to explain everything in plain English. What that means is that you should feel comfortable asking questions about your money and they should give you a satisfactory answer that makes sense.
Basically, your financial advisor should help educate you at the same time. They should be able to explain why they’re making certain decisions with your money and how it’ll affect you. They should also have a clear plan for you and make sure you stay the course even if the markets all of a sudden take a beating.
Your financial advisor could end up being a valuable member of your network as you may be working with them for a long time. It’s important to build a relationship early with them so you can build trust and plan for your future. If you need help finding a financial advisor, check out this article I wrote.