Why liking your financial advisor is not a good enough reason for using their services

I’m on the side of those who believe that the vast majority of people benefit from having a human adviser to assist them particularly in the initial planning phase and also when the markets start ‘misbehaving’.

This post isn’t about that debate. Plenty of other people have covered it extremely well in numerous other blogs and articles. This blog is more about why liking your adviser is a whole lot less important than the process they guide you through.

Over the course of the last few years myself and my business partner have come across a number of potential clients with portfolios managed by other advisers. Often the clients have talked about the very good relationship they have with the adviser and how they feel well looked after. When they show us how their portfolios have been constructed however, we’ve often been shocked by how poorly we interpret those portfolios to fit with what the clients want to get out of their finances and proper measures and discussions of their overall need and capacity to take and willingness to bear risk.

Indeed one well know brokerage house here in Norway had constructed a portfolio for a lady in her late 50’s with no other income, comprised purely of Norwegian equities. At the time we spoke to her the portfolio had had a good run but we pointed out how poorly it actually met her overall needs and how it was exposing her to a considerable amount of unnecessary risk. Whilst she appreciated the time and trouble we spent exploring the various issues with her she decided, after a period of reflection, to stay with her current adviser because he was so nice to her.

I hope that things have worked out for her ok but fear that she may have been through a rough time recently given the way the Norwegian market has behaved. Our job as an adviser is not to be a friend who bends over backwards to agree with you and please you. Yes we will always deliver the best service that we can but we’re going to do it combined with a disciplined process which will sometimes involve us disagreeing with you, getting you to reexamine your thinking on certain issues and from time to time flat out telling you that you’d be an idiot to go ahead with a certain course of action.

You need an adviser who can be honest with you, at times brutally so if you want the chance of having a financial plan that works successfully for you. I sometimes tell people that part of my job is to stop them being an idiot with their money and that they’re going to have to pay me for the privilege. That might put some people off – that’s fine with me. If it’s the case they’re probably the sort of people who might think twice about some honest advice when it’s needed most.

A good adviser will be able to demonstrate how their process serves you in terms of analysing your needs translating that into an investment portfolio and other related advice and how they follow up and reassess your plan on a regular basis. If they can’t document this and show you examples of how they’ve employed this process successfully, preferably with client references, then take your money and run elsewhere.

Av: Richard Stott, Founding Partner i Connectum

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