Inside Business

How to Choose an Advisor

INDEPENDENCE

Getting properly independent advice is critical to your investing success. Make sure you understand any financial relationships the advisor may have with asset managers, funds, investment platforms or product houses. The advisor may work directly for a product house, or may receive commissions for selling you particular funds or products. If such links exist, rather seek independent advice; or at least ask hard questions to make sure that you will not be receiving conflicted advice across products, product providers and investment funds.

COMPETENCE

Interrogate the professional and educational qualifications of your advisor. Are they just focused on selling you products, or are they focused on the things that really count in successful investing, i.e. proper portfolio design, cost compression, tax-efficiency, discipline, etc?

INTEGRITY

Your advisor should tell you what is true, regardless of how uncomfortable it is to hear. Advisors should be honest in respect of what they are able to do for you. Anyone who claims to be able to forecast fund performance, exchange rates, or any market prices, should be viewed with deep suspicion.

SCEPTICISM

The history of the investment industry has too many instances of conflicts of interest, mis-sold products, hidden costs, and a myriad of non-transparent ways of making you poor. Your advisor should be sceptical and apply his/her scepticism to rid your investment portfolio of the dead-weight that may be dragging it down.

FINANCIAL COACH

A key function of your advisor is to help you to do the right thing, when doing so is difficult, i.e. when markets are in a bubble, or in turmoil. Your advisor needs to be someone whom you like and trust; but who will also tell you hard truths that you don’t necessarily want to hear.