When your search for an advisor ends, the work of building a partnership begins.
If the energy you’ve spent in finding the right financial advisor is going to pay off, it’s important to get off to a good start. Above all, that means being candid about your goals and your assets. The more specific you can be, the better.
From the outset, you should put a high premium on clear communication. The best way to ensure that you and your advisor understand each other is to put things in writing.
After you meet, ask your advisor to send you a letter summarizing your goals, your willingness to take risk, and your overall financial situation. If the letter reflects what you’ve said, you should sign and return it, keeping a copy for your records. If the letter is vague or leaves things out, let your advisor know and ask for a more detailed revised statement.
While the misunderstanding may be something your advisor got wrong, you might also have second thoughts about your own instructions when you see them in black and white.
|What to do||What not to do|
|Insist on periodic meetings to review your plan||Don’t be passive|
|Read the reports and other material you’re given||Don’t agonize|
|Be inquisitive and ask questions||Don’t have unreasonable expectations|
|Take a long-term view and give decisions a chance to pay off||Don’t expect to have your hand held|
Your part in maintaining a relationship with your advisor means staying actively involved. If you don’t stick with your investment program or keep an eye on how effectively your plan is working, nothing will happen. And that won’t be your advisor’s fault.
You should let your advisor know when you anticipate major changes in your goals or circumstances, since they may require changes in your investment plan. Any advisor will tell you that financial planning is much harder — sometimes even impossible — after the fact.
If you want your advisor to buy or sell investments in your portfolio, you have to give clear instructions. Don’t assume your advisor is going to intuit what you want. In any case, you’re the boss. It’s also a good idea to pay careful attention to your brokerage and fund company statements and all trade confirmations.
Above all, never hesitate to ask questions, and insist on clear explanations. Part of the advisor’s job is to evaluate investments in relation to each other. But you might want to know what the advisor’s stake is if you make one investment rather than another. Most important, be sure the recommendation makes sense for you.
Find an expert
You should recognize that even the most knowledgeable advisor may not be the best source for certain types of information. For example, you may want to talk to a specialist about your retirement plans. In most cases, your employer sponsored investments will be managed separately from your other investments. However, your retirement portfolio can influence the investment decisions you make elsewhere. For example, if some of your retirement funds are invested in your employer’s company stock, you might decide to avoid buying stocks in the same industry for your personal investment accounts.
Or, you may work with an insurance specialist in addition to your advisor if you’re considering a life insurance trust, for example, or if you have a small business. Setting up a buy-sell agreement or buying key employee insurance may be important in your financial plan, but they aren’t investment decisions.
However, if you’re working with an advisor to create a long-term financial plan, it doesn’t make sense to keep secrets about decisions you have already made or the other advisors you’re consulting.
Your work together doesn’t stop after your initial meetings with your new advisor. After you put your financial plan into action, you’ll want to set up regular reviews to reassess your plan. Once a year may be enough. But if you’re actively investing, you may want to meet or talk more frequently.
For example, you will want to review the monthly or quarterly reports you receive from your mutual funds, managed accounts, annuity providers, and brokerage firm with your advisor and alter your portfolio when appropriate. And you’ll certainly want to discuss any major changes in your personal life that might mean you need more insurance, a college savings plan, or a new estate plan.
Try an experiment
As you test your new relationship, you might consider starting with a fairly narrow focus. Ask your new advisor to help you invest for a specific purpose, like your daughter’s education, or with a specific amount, like your retirement plan payout. Advisors may be willing to work on a specific assignment.
Of course, you’ll have to assess and act on the advice you’re given. But you can also evaluate the way in which the advisor makes investment recommendations and explains them to you. If you’re satisfied, you can then make a longer-term arrangement to work together.
Secret Of Building Successful Partnership With Your Advisor by Inna Rosputnia
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