How NOT to Find Your Financial Advisor

The Biggest Mistakes in Financial Planning Series

by Harvey Jacobson, CHFC, MBA, CLU

Harvey JacobsonYou receive a phone call during dinner from a very convincing cold-calling financial advisor who is offering you a way for you to earn 20% of your investment within the next six months. The plan deals with investments and lingo that you don’t totally understand, so you’re thinking… “Wow… this guy really knows his stuff…. it’s worth a try!”

You just received an invitation in the mail to attend an informative seminar at your local Marriot regarding “How not to lose money in a turbulent market.” Lunch will be served and some great guest speakers will be talking to the group who are experts in their field. A free analysis will be provided, so be sure to bring your investment statements with you.

You’re driving home and on the radio you hear a commercial about a financial “expert.” The radio talk show host himself is endorsing this person. You think: “If he’s good enough for him, then he can certainly help me too!

You see an ad in the paper regarding a company that will provide insurance quotes for people who were previously unable to get insurance. “Sounds like a deal. I’ll set an appointment.”

You’ve just finished a round a golf with a guy who is a scratch golfer and owns a financial planning firm. He offers to review your portfolio. “If he can make me money like he plays golf, I can’t possibly lose. I know my wife will love him. He reminds me of Bruce Willis.”

The above examples illustrate how easy it can be to start on a road that could cost you a lot of grief and money.

So, what IS the ideal way to find a quality financial advisor?
Finding the right financial advisor is as important as the investments themselves. The ideal way to find a financial advisor is through a referral from an existing client.

Find out everything you can about your financial advisor. Ask your referring friend some tough questions like: How long have they been using him (her)? What work has he done for them? (Estate, Business Continuity, Retirement Plans, Portfolio Management, etc.) How does he charge for money management? How much does he charge? Who pays for trades in the portfolio?

Every time I meet a new client that has had a bad experience with an advisor, it is because they truly knew nothing about his practice before they hired him. They may have felt good about the relationship in the beginning, but generally it was because the advisor’s skills were primarily in the marketing arena, not in the technical aspect of being a financial advisor. In other words, he was a good salesman. (The interesting thing is that for the financial advisor all these ways of finding new clients WORK. If they didn’t, advisors wouldn’t continue spending money on using them.)

When a new client has done some homework about the financial advisor, they generally make the right decision up front. The extra research will help minimize your risk of teaming up with the wrong person.

Harvey Jacobson is President and CEO of California Financial Partners, Inc.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article published originally Jan 10, 2010, Los Angeles Daily News.

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