Advisors: Telling the Good from the Bad

Let's go back to our bowling shoes analogy, begun in my last article. From experience, we know that proper shoes lead to higher scores and fewer injuries. We concluded that the same could be said for hiring a financial advisor who adheres to the fiduciary standard, but how can you tell the Good from the Bad?

How to choose an advisor

Some financial experts argue that how you decide to allocate your assets is even more important than which individual securities you choose to own within that specific asset class. But how do you assess an advisor's ability to do that? And what are the right questions to ask?

Finding help is a function of what kind of help you need. While a carefully constructed portfolio could theoretically meet the risk tolerance of two different investors, it is unlikely that they will both have the same need for advice. One investor may be a young, tax-paying client trying to maximize their after-tax results. Finding an advisor with a sound tax background would be best in this scenario. The other investor may have no concerns over taxes, but instead is trying to maximize gross portfolio returns. This investor needs an advisor with a track record of generating benchmark-beating results. And if you need help allocating across sectors, don't be afraid to ask your candidate if that is their skillset.

Be sure to find an advisor you also like and trust. The relationship you are about to enter should ideally be in place for years, if not decades. Don't be afraid to work with an advisor younger than yourself. You'll value that long-term relationship during your retirement. Think about your advisor like you would an investment; before making a purchase, do your due diligence. Consider approaching a friend, relative, or neighbor, and asking them if they can recommend an advisor. When meeting with the advisor candidate, here are some questions to ask: What is their experience? Do they have reputable credentials? Is there an audited track record of results? If you're close to retiring, do they have specific retirement expertise? If you've got a special needs child, what is their experience there? There can never be too many questions.

How to tell good advice from bad

I often joke with investors that a well-diversified portfolio means always hating something you own. Not everything can go up together at once; some investments will be doing well, while others aren't. As a result, good advisors occasionally deliver uncomfortable results. During periods of strong market returns, they might lag behind, whereas during market declines, they'll be pushing you to buy assets you already own, and are losing money on, at lower prices! Such advice is sound, principled and practical.

Look for firm designations like Registered Investment Advisor, and individual designations like Certified Financial Planner or Chartered Financial Analyst after your candidate's name. These firms and individuals are obligated to act as fiduciaries, putting your interests ahead of their own. What you don't want to hear from anyone: promises about high expected returns, sales pitches for high-commissioned financial products, or representations that seem improbable, like no fees being charged for your advisor's services. Don't be naïve. The investment management industry generates billions of dollars in annual fees and commissions. In that kind of environment, knowing that such pressures exist is a good starting point for considering integrity and effectiveness. Good advice is what's in the client's best interest, not the advisor's.

Which brings us back to bowling shoes

From experience, we know that proper shoes lead to higher scores and fewer injuries. Think about that when you are seeking the right fit for a financial advisor. So long as they are working in your best interest and achieving better outcomes, why not lace up a pair of bowling shoes? You'll be richer and safer for the experience.

The Fiduciary Standard:

An adviser must put their client's interest first.
An adviser must operate with full transparency.
An adviser must not mislead clients; they are required to provide full and fair disclosure of all important facts.

An adviser must avoid conflicts of interest and must fairly disclose any unavoidable conflicts of interest.

Click here to view our Disclosure

WARRANTIES & DISCLAIMERS

There are no warranties implied.
Any opinions expressed on this website are the opinions of WT Wealth Management and its associates only. Material listed on this website is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. You should always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETF’s carry certain specific risks and part or all of your account value can be lost.

At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

View Disclosure

WT Wealth Management is an SEC registered investment adviser, with in excess of $100 million in assets under management (AUM) with offices in Flagstaff, Scottsdale, Sedona and Tucson, AZ along with Jackson Hole, WY and Las Vegas, NV. WT Wealth Management is a manager of Separately Managed Accounts (SMAs). With SMAs, performance can vary widely from investor to investor as each portfolio is individually constructed and managed. Asset allocation weightings are determined based on a wide array of economic and market conditions the day the funds are invested. In an SMA, each investor may own individual Exchange Traded Funds (ETFs), individual equities or mutual funds. As the manager we have the freedom and flexibility to tailor the portfolio to address an individual investor's personal risk tolerance and investment objectives – thus making the account “separate” and distinct from all others we manage. An investment with WT Wealth Management is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Any opinions expressed are the opinions of WT Wealth Management and its associates only. Information offered is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. Always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETFs carries certain specific risks and part or all of an account's value can be lost. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies, sector and/or thematic ETFs and investments in single countries typically exhibit higher volatility. International, Emerging Market and Frontier Market ETFs, mutual funds and individual securities may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability that other nations experience. Individual bonds, bond mutual funds and bond ETFs will typically decrease in value as interest rates rise. A portion of a municipal bond fund's income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains (short and long-term), if any, are subject to capital gains tax. Diversification and asset allocation may not protect against market risk or investment losses. At WT Wealth Management, we strongly suggest having a personal financial plan in place before making any investment decisions including understanding personal risk tolerance, having clearly outlined investment objectives and a clearly defined investment time horizon. WT Wealth Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. WT Wealth Management's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of WT Wealth Management's website should not be construed by any consumer and/or prospective client as WT Wealth Management's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by WT Wealth Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of WT Wealth Management's current written disclosure statement discussing WT Wealth Management's registrations, business operations, services, and fees is available at the SEC's investment adviser public information website (www. adviserinfo.sec.gov) or from WT Wealth Management directly. WT Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WT Wealth Management's web site or incorporated therein, and takes no responsibility therefor. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

Advisors: Telling the Good from the Bad

Contact Us Today