Your relationship with your wealth advisor is a vital component of your overall financial health, so it’s imperative that you trust their advice. With recent reports of advisors feeling pressure to make recommendations based on commissions and quotas, it’s a good time to review some key ways to ensure your advisor has your best interests in mind.
Seek out an agnostic advisor:
A client should never have to think "Am I only being sold this product because my advisor is making more money on it?" That would be the biggest destroyer of trust, because it introduces suspicion that the advice being given is not in their best interest. And trust really is the key to the advisor/client relationship. It's the number one factor when working with a wealth advisor — do you trust them?
When an advisor is independent and agnostic, there is no conflict of interest. They can be objective when assessing their client’s needs and find the most suitable solution for them, instead of selling them on a product that they are getting paid more for or have a vested interest in. When that bias is removed, they are free to think of the best solutions.
Confirm you’re getting unbiased advice:
There is nothing wrong with requesting transparency and explanations. Ask your advisor questions such as: How do you get paid? Do you charge a fee? Is there a commission? Do you get a trailer fee (the fee a product supplier pays an advisor)? Do you have any vested interest in or connection to this product?
Then ask about the screening tools your advisor uses. Here at The Latremoille Group, we use independent third-party research tools to verify our selection of products. You want to ensure the tools your wealth advisor is using are not produced by the same company that produces the products they are recommending. You want them to maintain independence and transparency throughout.
You should also ask your advisor how often they are updating their products. Our portfolio manager is constantly reviewing what we have, keeping an eye open for new things, and assessing what we offer versus what else is available. We're always looking for the better mouse trap for our clients, so to speak.
Request regular updates:
The client has a right to know — and should know — what they're paying for, and why it costs what it costs. The new Client Relationship Model Version Two (or CRM2) regulations require investment firms to report the cost of advice and the annual performance. The Latremoille Group is already sending all of our investment clients a CRM2 statement that breaks down their portfolio’s performance and the fees. And with that, clients can better determine that their advisor really is acting in their best interest.
Speak up if you’re unsure:
I am all for empowering clients to speak up and to not just sort of wonder, or feel embarrassed to ask a question. Definitely challenge your advisor if you feel you need to. If they have trouble answering your questions or you feel that they are obscuring something, then you really want to question the future of your relationship. (To learn more about how to break up with your advisor, click here.)
Move on with care:
If you’re looking for a new advisor, start by consulting our Wealth Advisor Selector Questionnaire. You want to make sure you're dealing with experienced people who have the right training and wisdom. Then, check that they have a well-organized team, because due to the complexity of managing wealth, you want your advisor to have specialists working with them. Here at The Latremoille Group, we have specialists in portfolio management, taxes, money transfers, documentation reporting, etc. who are all supervised by one experienced advisor. Also, ask how many clients the advisor has and if their team is big enough to handle them because often, advisors have way too many clients. (When they are trying to service 300 clients and there are three people on the team, they may not be able to be there for their clients when the need arises.)
It’s also perfectly valid to ask about an advisor’s track record and request sample performance reports. We customize everything we do for each client, but we are able to say, "For this type of client, who has this mix of assets, is in this life situation, and has this set of objectives, this is our typical performance." A good advisor can give you proof points.
Beyond that, it's fair game to ask an advisor about their investing philosophy and process. How you do business? What you believe in? How do you make your decision? Then get them to walk you through how they would go about investing your money. Ask them to detail the next steps, what your portfolio will look like, how often you will meet to review, etc.
Establish trust with your new advisor:
I think the most important thing for establishing trust is for wealth advisors to really listen to their clients. I go through a series of questions with them that are geared towards understanding their views, their knowledge, what their life situation is, what they want to accomplish, what's standing in the way of them achieving that, etc. And then together we work on an action plan for how are we going to accomplish their goals.
When you listen to someone and take to heart what they're saying, then you're in a position to be able to provide solutions, and that builds trust. I lay out exactly what I am going to do for my clients, and then I do it. By being successful and transparent, trust builds.