Taking care of your money is work. You might wonder if you’re saving enough, investing smartly, not borrowing more than you can really afford, and of course, keeping your eye on how any of this impacts your taxes. But the biggest question on your mind, especially as you inch toward retirement, might be: how do you know for sure you’ll never go to zero during retirement? In other words, never (ever) run out of money when you’re too old to work.
Most people rely on themselves to work through the answers. The National Financial Educators Council reports two-thirds of Americans don’t currently work with a financial advisor. They may seek advice from family and friends, but they are not enlisting a professional financial advisor to help. Yet, at the same time, most people say they are not confident making big financial decisions on their own. A recent Capital One / Decision Lab1 survey reports 77% of people say they feel anxious about their financial situation. The conclusion? People may want help from an advisor but are paralyzed when they have to think about where to find the right financial advisor.
People Don’t Trust Financial Advisors
The fact is, trust is an advisor’s most important asset. They make their livings based on their reputations, yet congress members and car salespeople earn the same level of trustworthiness as financial advisors. A 2021 survey by the data research company Morning Consult2 shows that 36% of respondents said they tend not to trust investment and wealth management advisors, and advisors need to earn their trust. There’s good reason for the public to be skeptical and wary. For decades, the financial advisor industry has gone out of its way to put marketing and sales ahead of advice and qualifications. Expertise has taken a back seat to generating commissions. People anticipate they may be talked down to when they meet with an advisor. The reality is financial services is an industry. It is not a profession. There are no real barriers to entry like with doctors or lawyers. When it comes to fees, financial advisors who are not fiduciaries have been free to operate as a black box. That lack of transparency, combined with over-promising, under-delivering, and even outright lying, has called advisors’ integrity into question.
The right Advisor is your financial advocate and is paid only by clients, not commissions.
The most important driver of trust is when a financial advisor becomes your advocate and acts with your best interests in mind, according to a 2022 Vanguard3 study. The right financial advisor helps reduce anxiety while at the same time helping you achieve your definition of financial security and providing you with knowledge that helps you gain confidence in your overall strategy. That means making big decisions where you don’t have the experience, expertise, or knowledge are made in collaboration with an expert on your side who has earned your trust.
Setting Expectations for Your Financial Advisor Relationship
Before you work with any financial advisor, think about what a successful collaboration looks like to you personally. What do you hope to gain, and what are your expectations for the relationship? When considering these factors, you have every right to set your expectations high and not settle for anything less.
So what should you expect? Reasonable expectations for a financial advisor are that they are:
- 100% fiduciary (legally held to the Fiduciary standard) and fee-only. Not a sales rep
- Fully transparent with all fees and costs
- Established and qualified with skills that align with your particular situation
- Responsive within 24 hours when you have a question or request
- Collaborative and humble
And what guidance will they actually provide to earn their fee?
- Holistic and dynamic financial planning
- Tax-focused planning
- Investment advice and/or portfolio management
- Real estate investments
- Socially responsible investment strategies
- Family: college, special needs, estate planning, social security strategies, long-term care
- Navigate liquidity events
- Complex tax planning for startup employees and/or self-employed individuals
Above all else, your financial advisor should want to spend time educating you. Every conversation you have with a great advisor should leave you wiser than before you had the conversation.
You shouldn’t be basking in the glow of your advisor’s expertise but instead become a collector of small tidbits of new knowledge that, over time, can empower you and start to improve your own financial literacy. As a result, your conversations about your money will become more sophisticated over time.
Collaboration Is the Key to Confidence
The ideal relationship with your financial advisor is one where you collaborate to co-develop your overall financial plan and investment strategy. Your ideas and input matters because your fingerprints are on your own plan. You and your financial advisor each have a role, and your role as an active participant is a necessary ingredient in a successful outcome.
Finding the right advisor you can trust is a thoughtful process that has to be taken seriously. When done correctly, the advisor’s fee pays for itself. You can be assured that you come away having the answer to the all-important question, “if I live to be 95, can you actually show me how I’ll never go to zero while I’m alive?”
The only reason to hire a financial advisor is to gain peace of mind. Then it won’t matter when the stock market is going sideways because you have a plan and strategy you’ll be able to stick with because you helped create it and know every part of it.
Finding the right financial advisor can be challenging. Let Wealthramp help you find the right advisor who will help you with your personal financial needs and situation.
(1) Capital One Survey
(2) Morning Consult Survey
(3) Vanguard Survey
