How Do You Know If Your Financial Advisor Is Good Or Not

A friend introduces you to a financial advisor. You like what you’re hearing, and you like them as a person, but how do you know that they’re competent? Your friend’s recommendation holds weight, but before you decide to commit, it’s important to make sure that this advisor will meet your needs and expectations.

The same holds true for the advisor you came across on Google or at a networking event. Before you commit, it’s crucial you can determine if they’re actually a good advisor and fit for you.

A Good Advisor is More Than Just Liking the Person

A good advisor is someone you like, right? Yes, it’s important to like your advisor as a person. You need to be on the same page, and you should enjoy working with them. However, this shouldn’t be the only criteria for choosing an advisor. There’s more to the equation than just being a likable person.

To determine whether an advisor is good or not, they need to be tested. 

If a friend introduces you to an advisor and claims they’re the best, don’t just take their word for it. Put them to the test to see if they really live up to these claims. Otherwise, you may wind up disappointed by the lack of service or, worse, buying financial products that don’t really meet your needs.

So, how do you know if an advisor is a good or bad choice?

Do You Have a Good Financial Advisor? Here’s How to Tell

We talked about the importance of testing an advisor to see if they really are a good choice for you. But how do you do that? Here are a few points to consider.

They’re Not Afraid to Tell You “No”

A good financial advisor will tell you “no” when it’s necessary. Maybe an investment isn’t really a great option for you or may make it harder to reach your goals. Rather than just saying “yes” and not thinking about the consequences, a good advisor will consider the implications and advise against moves that aren’t in your best interest.

They Deliver Bad News

Advisors aren’t just there to deliver great news and share wins. They have to be comfortable delivering bad news, too. Try as you might to minimize risk or reach your goals, you may experience setbacks or run into issues along the way. 

A good advisor will be frank and honest when things don’t go your way. 

They Consider All of the Options

A good advisor will:

  • Consider alternatives
  • Discuss the alternatives with you
  • Weigh the merits of each option

Considering all of your options and weighing the pros and cons of each one will help ensure that you’re choosing the best possible option for your needs and goals. 

They Play the Devil’s Advocate

Your advisor should help you see all sides of the story. You may want to invest in XYZ, but your advisor should help you see the downsides, flaws, or potential issues with this decision. Rather than simply going along with what you want, a good advisor will help you see things you may not have seen or thought about previously.

They Help You Develop and Adjust a Custom Investment Strategy

Every person has unique financial situations and goals. Using cookie-cutter strategies won’t necessarily get the results you deserve or desire. A good advisor will work with you to develop a custom investment strategy that’s tailored to your needs and goals.

When life changes or the market shifts, your advisor will adjust that strategy to keep you on track or meet new goals. Maybe now is a good time to use a new tax-saving strategy or rebalance your portfolio. A good advisor will be proactive in helping you make these changes and adjustments to ensure that you’re on the right path. 

They’ll Help You Be Consistent

Life changes. Markets change. At times, things can get messy when you’re dealing with investments and financial planning strategies. For some, one brush with volatility is enough to make them pull out of the market and never consider investing again. A good financial advisor will help you be consistent and weather these storms so that you don’t miss out on valuable opportunities. They have experience dealing with short-term volatility and will know the right moves to make. 

Consistency is key if you want to reach your financial goals. It helps to have the experience and expertise of a good financial advisor on your side to help you stay consistent. 

They Look at the Whole Picture

A good advisor will look at the big picture when considering your finances. You may be seeking the help of an advisor for investing, but a good advisor will look at other pieces of your financial puzzle, too. They may look at the state of your emergency fund or your estate plan. They may recommend insurance products to protect your finances or look at different investment options. They look at the bigger picture to help you build a better financial future.

They’re More Than Just Order Takers

All of the points above support this one simple idea: a good advisor is more than just an order taker. They have your best interests in mind and consider each option carefully. If a decision ultimately does more harm than good for your financial future, a good advisor will tell you “no.” 

A good advisor will look at all sides of a decision, consider alternatives and come to you with bad news when things don’t go as planned or expected. They work with you – not just for you. That’s the real difference between a good advisor and an advisor who isn’t thinking about your best interests. 

The Bottom Line

To determine whether you have a good advisor, you have to put them to the test. Are they willing to tell you “no” and be honest about bad news? Will they take a holistic view of your finances and create a custom strategy for you? If not, it may be time to reevaluate whether this advisor is a good fit for you and your financial future.

To learn more about how KPN Enterprises can help you with financial planning or to schedule a call, contact us here