How to choose an Honest Financial Advisor in Ten Minutes

It’s possible a teacher (or anyone else) can choose a good financial advisor in the first ten minutes of an initial meeting. This simple process will save you time, money and plenty of heartache!

Our CEO, Josh Brown, brought up a terrific point in one Monday morning meeting. Josh pointed out that Ritholtz Wealth Management’s recent hires had one thing in common. The team was able to identify “the true believers” within the first ten minutes of the initial introductions.

Though there were dozens of job candidates, it was obvious very early on who would be the right fit. This is paramount for a firm who values its unique culture above all else. Like Josh said, “I did not need a 750 word e-mail or an interminable ten-step interview process to make a decision!”

This got me thinking. Why not use this same process to pick a competent, and  ethical, professional to manage your own money? Within ten minutes you can eliminate the poseurs by implementing this strategy.

If a potential advisor says any of these five things, run (don’t walk) from your initial meeting.

  1. “You don’t pay anything for these products.” This means fees and commissions are skimmed off the top rather than collected in a transparent process. The secret to the financial industry’s profit machine is they send out few bills. Don’t fall for this nonsense. If an advisor says this, it is often done to obfuscate unnecessary, return-destroying fees.
  2. “We can offer high returns with no risk.” This common deal closer has no factual merit. Simply put, the reason you can make money is because you can also lose it. Never forget this.
  3. “We can time the market” I once had a client show me a horrible portfolio that was said to be based on a “computer program that was able to predict human emotion.” Ask yourself this if anybody ever pitches you this: “Why would this person tell me the secret? If this actually worked, would he really need to waste his time chasing after a few shekels in a middle school teacher’s retirement account?” The answer should be very obvious.
  4. “We are like a fiduciary.” There is no such animal. Either you are looking out for the best interests of your clients or you are not. Fee-only RIAs fit into this category; insurance salespeople or stock brokers do not. If you believe this nonsense, I would assume you also think a woman could be “a little bit pregnant.”
  5. “You need to sign up today!” This is a transaction-based, not relationship-based philosophy. Playing on emotion and a sense of urgency are not characteristics of a good financial planner. This is the strategy of someone who wants a quick sale. This is purposefully designed so most energy can be devoted to the next conquest. Most likely, you will only receive attention from this individual when he has something new to sell or you decide to leave his practice. Very little time will be spent on the crucial, but time-consuming, component: long-term financial planning. Ask yourself if you really want a financial tourist managing your money?

Nothing in life is guaranteed.  All one can do is use a sound repeatable process to increase the likelihood of success. These five guidelines can help you get to that place.  You can use these tips to create your own” knock out” list to weed out unethical or incompetent advisors.

Like Warren Buffet once stated, “Investing is simple, but not easy.” The same can be true for choosing a financial advisor. You can save yourself much time and energy by sticking to this process and trusting your instincts.

Always remember, the truth doesn’t take sides. Let these five pointers make the decision for you.


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