Choosing The Right Advisor

“Part of your heritage in this society is the opportunity to become financially independent.” ~ Jim Rohn1 (American entrepreneur, author, and motivational speaker)

We live in a wonderful society where we can all achieve financial independence if we work hard and do what’s necessary to get there. To be where you are in life, you must have put in a lot of effort, making sacrifices and smart decisions about your finances to achieve the success you have.

Financial independence not only comes from working hard and saving, but also making smart choices with your savings, spending, and investments. Unfortunately, making smart choices is easier said than done. There are so many options to choose from, each with their potential ups and downs. Most of the people I know who have achieved financial independence, have done so through following the advice of their trusted financial advisor. But choosing the right advisor isn’t always easy.

Do you remember the last time you had to choose a primary care physician? If you’re like me, you probably spent quite a bit of time researching and meeting with different doctors, then asking them a lot of questions to determine if you’d be getting the best advice money could buy. After all, good health is essential in having a quality life.

Why am I telling you this? Well, I’ve heard horror stories over the years about investors who were working hard to achieve financial independence, only to be taken advantage of by the very person they’d hired to give them good advice.

No two advisors are the same, just as no two people are exactly alike. In this letter, I’ll tell you what education and personality traits are essential to find in your advisor. With that information, you’ll know what to look for when interviewing potential advisors so you can find the best match for you. After all, they’re applying for a very important job. Make sure they pass your interview with flying colors.

Since interviewing financial advisors isn’t something you do every day, I hope this list will help you quickly identify the questions you should ask the advisor and yourself.

First on the list of important factors is education. You wouldn’t trust a doctor that hadn’t passed his medical exam to treat you for a life threatening illness, would you? I didn’t think so. When it comes to your financial success, you shouldn’t trust an advisor who doesn’t have the necessary education to provide you with the advice you need to achieve your goals. Here’s a list of licenses an advisor needs to legally be able to provide different types of financial advice:2

Series 3: With this license an advisor is authorized to sell commodity futures contracts, which are generally considered the riskiest publicly traded investments available.

Series 6: This license is known as the limited-investments securities license. Advisors who hold this license can sell “packaged” investment products such as mutual funds, variable annuities, and unit investment trusts (UITs).

Series 7: When an advisor holds this license, they’re authorized to sell virtually any type of individual security. The only major types of securities or investments that Series 7 licensees are not authorized to sell are commodities futures, real estate, and life insurance.

Series 63: Known as the Uniform Securities Agent license, this license is required by every state and authorizes licensees to transact business within the state. All Series 6 and Series 7 licensees must carry this license as well.

Series 65: This license is required by anyone intending to provide any kind of financial advice or service on a non-commission basis.

Series 66: If an advisor has this license, they’ve essentially passed the requirements to attain both the Series 63 and 65 licenses.

Those are the major licenses you should look for on a potential advisor’s resume. But, if you’d like to learn more about this, please visit www.investopedia.com and search for “licenses” to see an article titled “Breaking Down Financial Securities Licenses” for further details.

Next, you should seek to work with someone who’s caring. Have you ever worked with a professional who had the right education, but didn’t seem to care about you at all? Your financial health is important to all aspects of your life. With that in mind, make sure your advisor asks you about your life and what’s important to you. If an advisor tries to give you advice on what to do with your money, but they haven’t asked you about your values, short and long-term goals, important relationships in your life, and how those relationships tie into your goals, how can they tell you the best route to reach those goals? They can’t. Another way for an advisor to show they care is to make sure you understand what they’re recommending and why. If they take the necessary time to educate you, you’ll know that you’re making good financial decisions. That can help you feel confident about your choices and put your mind at ease. Another key trait your advisor should demonstrate is integrity. We all want to avoid the Bernie Madoffs of the world. It could be hard in a one-to-two hour meeting to truly know if someone is trustworthy. Make sure you do your homework. Here are some ways you can find out if the advisor you’re considering deserves your trust:

Research them on FINRA’s BrokerCheck: www.finra.org/BrokerCheck. FINRA is the Financial Industry’s Regulatory Authority. Their chief role is to protect investors.³

Search for them on the web. You should find their website, social networking accounts (if they have any), and in some cases you’ll uncover other gems that’ll show you their professional identity and shed light on who they are as a person.

You can learn a lot about someone by what they say and how they act. Pay attention to how they treat you when you spend time together. Are they conscientious of your time? Do they act and dress professionally? Do they show you they care about you and what’s most important in your life? Those are just a few questions you should ask yourself when considering hiring an advisor. In the end, trust yourself and your feelings about what you need. If you feel uneasy about someone you’re interviewing, keep looking. If you’ve done all your research and you feel that an advisor is the right fit for you, you may choose to ask them for their advice and make them your trusted advisor. As Susie Orman said, “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.”4 If you’re still worried about the what-ifs, you haven’t found the right advisor yet. But there are great advisors out there. If you follow these recommendations, you’ll find the right one soon enough.

If there is anything we can do, please do not hesitate to call.