Advisor Qualities and Credentials

Can you trust your financial advisor?

Good article - I must say

http://network.nationalpost.com/np/.../11/can-you-trust-your-financial-advisor.aspx

And some excellent advice from Larry Swedroe.

http://moneywatch.bnet.com/investing/blog/wise-investing/?tag=content;col2

FWIW-my view on how to find an advisor you can trust

Surveys show that along with the financial expertise of the advisor, investors look for someone they can trust. Trust, however, is an intangible quality; it cannot be quantified in the same way one can look at a baseball player’s batting average. Therefore, my recommendation is that when interviewing a potential financial advisor you require them to make the following eleven commitments to you. Doing so will give you the greatest chance of avoiding conflicts of interest and the greatest chance of achieving your financial goals.

1.Our guiding principle is that our advice will always be to do what is in your best interest.

2.We provide you with a fiduciary standard of care— the highest legal duty that one party can have to another.

3.We are a fee-only advisor—avoiding the conflicts that commissioned-based compensation can create.

4.We fully disclose potential conflicts.

5.Our advice is based on the latest academic research, not on our opinions.

6.We are client centric—we don’t sell any products, only advice.

7.We provide a high level of personal attention—each client is assigned a team of professionals with which they will develop strong personal relationships.

8.We invest our personal assets, including our profit-sharing plan, based on the same set of investment principles, and in the same or comparable securities, that we recommend to our clients.

9.We will develop an investment plan that is integrated into estate, tax, and risk management (insurance) plans. The overall plan will be tailored to your unique situation.

10.Our advice is always goal-oriented—evaluating each decision not in isolation, but in terms of its impact on the likelihood of success of the overall plan.

11.Our comprehensive wealth management services are provided by individuals that have the CFA, CFP, PFS, or other comparable designations.

I agree that Advisor "qualities" are often more important than Advisor "qualifications". The qualifications are just a measure of whether they can take courses and pass exams. I would much rather have a financial advisor who:

• Is honest
• Is knowledgeable
• Understands my goals and requirements
• Communicates in a way I understand
• Is available to answer my questions
• Makes me feel comfortable about handling my money
• Makes great suggestions that align with my goals
• Doesn't push me beyond my risk comfort
• Puts my goals and needs ahead of his profit

As long as he meets these requirements, I am happy.

Just for fun, here are some self-made millionaire (or billionaire) businessmen who dropped out of high school - a.k.a have no credentials to speak of:

• Richard Branson (founder of Virgin Airways and Records)
• Jack Kent Cooke
• Marcus Loew (co-founder of MGM Studios, founder of Loews)
• Jim Clark (founder of Netscape)
• W. Clement Stone (founder of "Success" magazine - how's that for irony)
• Charles E. Culpeper (owner and head of a little bottling company called "Coke")
• many, many more... I am sure you can think of a few yourself

Credentials are sometimes overrated.

Jon: the problem with the CFA is that it can involve many more additional years of study, none of it paid. Most CFAs end up in back-office roles, not advisor-facing. Although, in investment counsel firms, more and more of the advisor-facing peeps have a CFA.

Finally, in your average IDA firm, there's a bunch of research peeps doing the analysis - you can put your name on that stuff and send it out to your clients; there's no real need to do your own individual securities analysis (and doing so may involve additional compliance requirements, depending on your firm).

What it can come down to for individual advisors is that time is short. What is going to provide the best payoff for your efforts? Getting a CFA designation is *not* going to top the list for most. Getting additional licenses, as you've suggested, is more likely; as is attending sales and other relationship development seminars etc.

The awareness of the CFA on the part of the investing public is low - heck, the awareness of the CFP, which is considerably more related to individual investing efforts, is also low and seen by lots as unnecessary (I think a lot of people who pursue the CFP are fulfilling job or advancement requirements imposed by an employer).