Tips Why You Need Good Financial Adviser

Saturday, September 4, 2010, 6:00 AM | 4 Comments

No matter how well-versed you are in investing and setting up your portfolios for retirement and such, a time comes that you need a financial adviser that will hold your hand and bring you out of your own mini-recession in your personal financial well-being. That is the essence of having a financial adviser.

You ought to be aware of the fact that a successful investment adviser needs to be world class at investing and as importantly, getting you as a client to act upon their investment advice they dispense. At some point, however, their efficiency must be evaluated by none other than you and you alone.

  • You as an investor…

    Individuals sometimes make decisions when investing that are inconsistent with their financial well-being. In some instances, these inconsistencies are driven by emotions that lead folks astray in their personal finances. Investment advisers are probably all too aware that emotions and other failures come into play when it comes time to discuss your portfolio’s performance. Your adviser must therefore successfully navigate the performance discussion and in so doing must renew the relationship between the two of you.

  • Good advisers must convey the complexity of the task…

    The multitude of the security types and the market itself create a complex environment with many decision points for an adviser. Your adviser must convey a more realistic level of complexity by creating an understanding with you the current situation and the broader array of alternative choices before making a final recommendation to you. Keep in mind that financial advisers have difficult jobs in that their performance is judged after the fact.

  • Good advisers must continually reinforce investment process…

    Your financial adviser must establish, document and communicate a corporate investment philosophy and process to you. However, this must continue on a regular basis not just once in the beginning when you hire the adviser who must present to you a very realistic and attainable portfolio performance.

    Good advisers must adopt broader frames when discussing performance…

    Some investors look at the performance of one individual security at a time and will view performance as simply price sold minus price paid. Your financial adviser must educate you to broaden the frame of investments so you look at the portfolio performance as a whole.

    This brings us to some specific ideas for broadening the frame including the following:

    • Tax adjustment…

      Comparing the relevant after-tax returns with the tax-adjusted benchmark.

    • Risk adjustment…

      Broadening the frame by including risk and the risk-adjusted return.

    • Progress toward a goal…

      Portraying your portfolio’s performance as growth in dollars toward a goal or an increase in wealth.

In a Nutshell
Good advisers develop a better understanding of the emotional and other failures through which you as an investor will better see the performance of your portfolio and your adviser’s strategy and approach in a timely manner.

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  1. 4 Responses to “Tips Why You Need Good Financial Adviser”

  2. By Boldy on Sep 16, 2010, 6:04 pm | Reply

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  3. By Truden on Sep 18, 2010, 1:17 pm | Reply

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