I made my choice years ago to manage my own investments, but for many this is a daunting task. These people would rather work with a financial advisor. This may seem like the last investment decision an investor would have to make, but this isn’t true. It brings the daunting task of finding a good financial advisor and the need to continuously monitor the quality of advice.
Some of the best advice I’ve seen on finding a good advisor is chapter 6 of Rob Carrick’s Guide to What’s Good, Bad, and Downright Awful in Canadian Investments Today. Carrick sets the tone early saying “Warning: Finding a good financial adviser is harder than you imagine.” This is because a disappointingly small minority of advisors are any good.
Carrick goes through the traits of good and bad advisors and provides a list of “five killer interview questions that will help you avoid hiring a deadhead adviser.” A common theme is the willingness of the advisor to discuss fees and how he or she gets paid. Good advisors “have no problem discussing fees because they’re trained professionals who require and deserve adequate compensation for their work.” On the flip side, “if you hear and adviser scoffing at costs—and, most likely, telling you that performance is what matters—then keep looking.”
Carrick goes through a number of other important issues about financial advisors as well. If you’re in the market for a financial advisor, I recommend reading this chapter of his book. (Stay tuned for a review of the rest of this book next week.)