Dan Richards is president of Strategic Imperatives. He is a faculty member in the MBA program at the Rotman School at the University of Toronto. He also hosts a weekly conference call called Monday Morning Jump Start, which is about strategies for financial advisors. Advisors can see it GlobeAdvisor.com. He can be reached at richards@getkeepclients.com
In today's value-driven world, we all look to get the most out of every dollar we spend.
Recently, I hosted a series of luncheons with successful financial advisers. We talked about the clients with whom these advisers have the strongest relationships and who they are serving the best - in other words the clients who are getting the best value from them.
A number of common patterns emerged as advisers described these clients. Here are seven tips for investors looking to get the best out of their financial adviser.
Be honest.
To provide good advice, your adviser has to understand not just where you want to go in the future but where you are today. That means she has to know about your total financial situation, even if she isn't managing all of your investments.
One investor I interviewed recently said: "I'm not sure I want one person to know where all my money is." Just remember that if you keep your adviser in the dark, she'll be unable to give you advice that fully reflects your situation.
Be honest with your adviser in response to recommendations. If you need more information, most advisers will happily provide it. But when you simply don't feel comfortable with a recommendation from your adviser, say so - don't use a request for additional material to avoid giving an answer.
Invest time upfront.
To get the most from any relationship, you have to be clear about what you're looking for. A good adviser can help you clarify your goals - but you have to be prepared to spend some time upfront with her to do that. Spending time with an adviser early on to build a more accurate understanding of your situation can pay big dividends.
Continue to commit regular time.
Once you've established your initial goals, make it a priority to return calls and meet for updates. We're all busy these days - in light of that, many advisers have begun replacing some face-to-face meetings with structured phone conversations that might last 30 minutes. Let your adviser know how much time you're able to spend - this will vary with your situation, but if you aren't prepared to commit at least an hour each quarter, you can't expect to get the best out of her.
Finally, when scheduling a meeting, be clear about the issues you want to discuss, so that your adviser can prepare and make the meeting productive for you both.
Be consistent.
Once a direction has been established, you have to stick to your fundamental strategy. That doesn't mean following your plan blindly, ignoring significant changes in the environment or new opportunities. But if you're in your 40s or 50s and it made sense to have a large exposure to equities a year ago, barring a dramatic change in your personal situation it likely makes sense to continue to have a large exposure to equities today.
Maintain perspective.
Given markets over the past year, it's understandable that many investors are stressed out. Good advisers understand that and will talk about how you feel and whether you need to make changes to your portfolio.
In some cases, however, investors have become emotional basket cases, requiring constant reassurance and handholding. It's impossible for advisers to serve all their clients well if they're consumed by one or two.
Be open-minded.
When talking to your adviser, give her the benefit of the doubt and maintain an open mind about the advice you receive. That doesn't mean you're going to say yes to everything she recommends - but skepticism and paranoia among some clients has risen to a level where it's impossible for advisers to serve them well. Constantly second guessing your adviser is counterproductive - if you've reached the point where you don't trust anything you hear from your adviser, it's time to find another adviser.
Be reasonable.
Investors who get the best from their advisers understand that no one can predict the markets with certainty. That doesn't mean you're happy when experiencing steep declines in your portfolios, but it's not useful to point fingers and look for someone to blame.
Being reasonable shows up in other ways. Be patient if your adviser can't immediately respond to your calls. And be realistic in the amount you pay for her advice - you certainly want to pay a fair price but if every conversation about the commission on a transaction becomes a battle, ultimately neither of you will be happy.
Finally, when warranted, don't neglect saying 'Thank you.' All of us respond to positive reinforcement.
Markets over the last year have tested the mental and emotional fortitude of investors and advisers alike - the good news is that most relationships have survived intact and the markets now appear to have put the worst behind them.
There's an opportunity to learn from what happened in the recession. That's true for building solid portfolios - and it's also true when it comes to understanding what it takes to have a productive and rewarding relationship with your financial adviser.