“As a business owner or manager, you know that hiring the wrong person
is the most costly mistake you can make.”
– Brian Tracy (a leadership and sales coach and trainer)
Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager,
Lycos Asset Management Inc.
For many people, hiring a financial advisor is the right thing to do.
Your financial future should not be placed in the hands of some nice guy, a family friend or former sports star, or an accountant who’s too busy and knows less than you about investments. And you shouldn’t put your life’s savings in the hands of an investment or insurance advisor whose only qualifications are a license to sell you investments or insurance products.
A truly professional financial advisor takes a lifetime to build up their educational and professional credentials. They’ve gone through a period of articling or training with seasoned financial advisors, they’ve seen hundreds of situations similar to yours, carry liability insurance, and adhere to a code of ethics and practice standards.
A professional financial advisor, of course, doesn’t work for free. The payback comes through:
- higher returns and/or lower risk by selecting the right asset mix, selecting good investments, sheltering income from taxation, controlling risk, and setting aside funds for anticipated needs (so you are not forced to have to sell investments when they are down). An experienced investment professional may also help you avoid making costly emotional or irrational investment decisions.
- eliminating, reducing, and deferring income taxes so you’ll have more money growing faster to meet your goals;
- protecting your family against devastating financial losses – like the death, disability or illness of the family breadwinner, property loss, theft or damage, and liability claims. Without such protection, your lifetime of savings could get wiped out; and
- design an effective estate plan so your estate will be distributed according to your wishes, minimize tax and transfer costs, and protect your legacy from a variety of creditors. This not only gives you peace of mind, but hopefully will ensure your life savings is there to take care of your loved ones throughout their lifetime.
Hiring a professional financial advisor doesn’t mean you have no involvement – it is your life savings, not theirs. Your advisor is there to help you increase the odds of achieving your financial goals.
You could spend the time you need to educate yourself and dedicate the time you need to properly managing your investments, but maybe your time might be better spent bringing in the money, and then relaxing with family and friends.
Of course you want someone whose personality gels with yours who you can be comfortable with. But you also want someone who:
- has spent a lifetime building up their educational and professional credentials;
- has gone through a period of articling or training with a seasoned financial advisor;
- carries liability insurance; and
- adheres to a code of ethics and practice standards.
You want a mature financial advisor with good judgment who:
- you trust implicitly in their honesty;
- provides advice that is always in your best interest and is sound where you know they are well-versed in the topics that he or she advises you in;
- has many years of experience who has seen hundreds of situations similar to yours who has helped people solve their financial problems and put them on a path to achieving their goals;
- has the strength to get you to stick to your plan in the tough times when they inevitably come.
Finally, you should consider the investment orientation, strategies and philosophy of the advisor:
- What kinds of investments does the advisor invest in? – i.e. individual stocks, mutual funds, exchange traded funds?
- How does the advisor manage risk?
- How does the advisor decide on your asset allocation and when and how is your portfolio rebalanced?
- Does the advisor believe the market is efficient and therefore invests exclusively in market index type investments?
- What kind of strategies does the advisor utilize and what are the risks and returns of those strategies?
- Does the advisor believe in employing (higher cost) fund managers in attempt to outperform the market (how does the advisor identify those managers that are skilled (versus just lucky) who have a good chance of continuing to outperform into the future)?
- If you are investing more than $100,000, how does the advisor help you to reduce investment management fees so you keep more of your money working for you?
- What can you expect with regard to reviews, service and financial advice?
I hope that this article helps you find the right advisor to help you achieve your financial goals.
Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.