What to Look for When Choosing Your Team
In today’s digital age, with a 24-hour news cycle and the constant bombardment of advertising and otherwise filtered messages, it can sometimes be difficult to separate truth from misinformation. We all tend to misjudge facts and alter information to make it fit neatly into our preconceived notions of how the world works (insert joke about Tulip Mania in the 1600s). While biased thinking can present many challenges, one of the most pressing risks is on our financial outcomes.
Fortunately, one way to overcome investment biases is by working with a qualified fiduciary advisor. An experienced advisor can filter out irrelevant or incorrect data to help you make decisions that are truly in your best interests.
For example, financial media outlets would have investors believe that the sky is falling every time the market experiences a 20% dip. If you succumb to this fear, you may be tempted to sell out of your investments at a loss. Depending on where you are in your financial journey, this could cause irreparable damage to your portfolio. Your financial advisor should be able to talk you off this ledge by explaining the importance of market fluctuations and why your portfolio’s fundamentals remain strong enough to weather volatility.
The key is to find an advisory team with the experience, resources and perspective to provide non-biased advice that is in your best interests. Here are some characteristics to look for when interviewing advisors.
- A team that serves as financial fiduciaries 100% of the time. By definition, a fiduciary is legally obligated to act in your best interests. However, some advisors are dually registered, which means they serve as a fiduciary advisor in some circumstances and as a broker (i.e., a salesperson) in others. Brokers are only required to act in your best interests when making a recommendation. An advisor’s fiduciary duty applies to all aspects of their relationship with you. It’s important to ensure your advisor serves as a fiduciary, meaning he or she is putting your best interests first, at all times and in all situations.
- An independent team. The financial services industry is rife with conflicts of interest. For example, advisors at a wealth management company that also manages mutual funds may be incentivized for selling the company’s proprietary products. How can you be sure these are truly the best investments to meet your needs? The answer: you can’t be.
Your advisor should operate independently of any fund managers, insurance providers or investment products. This is a good way to ensure there are minimal conflicts of interests in the products and services your advisor recommends.
- A team that focuses on low-cost, tax-efficient strategies. Expenses and tax liabilities have the potential to quickly erode an investor’s returns. If your advisor isn’t looking for opportunities to lower your expenses and minimize your taxes, you could end up missing out on tens to hundreds of thousands of dollars (or more!) over the course of your life.
Find an advisor who is upfront and transparent about all expenses — not just the advisor’s fees but also expense ratios and other product fees as well. You also want an advisor who has experience implementing tax-efficient planning strategies, such as tax-loss harvesting, charitable giving strategies and asset location.
- A team that creates a custom, comprehensive financial plan to help guide your future. An excellent way to help achieve your specific financial goals is by having a plan in place to help guide your decision making. Your plan should be unlike anyone else’s, just as your current financial situation, goals for the future and financial challenges are unlike anyone else’s.
Make sure your advisory team has a wide range of experience across various financial planning topics, including investment management, estate planning, risk management, retirement planning, college planning, tax planning, debt management, business planning, etc. All these financial aspects should be incorporated into a single, comprehensive plan that is specifically designed to meet your needs.
- A team that bases its philosophy on rational, science-driven academic research. There’s lots of misleading financial data out there. Your team should have the knowledge, background and experience to get to the facts and develop strategies based in reality.
At Creative Planning, our experienced professionals serve as fiduciaries to clients at all times and in all situations. As an independent advisory firm, our diverse teams help ensure all aspects of your financial life are well cared for and working together to achieve your goals. Interested in learning more? Schedule a call with a member of our team. We look forward to getting to know you.