What You Should Expect From Your Financial Advisor

By Mark Wendell

In the realm of investment advice, value is defined by what you receive from your advisory relationship that meets or exceeds your expectations, for the fees paid. With most clients, it has much less to do with pricing or investment performance, than it has to do with the fulfillment of promises and commitments made at the outset of the relationship.  But the commitments will only have value if they are based on your clearly defined and thoroughly discussed – needs, expectations and goals. You know you’ve found the right financial advisor when that process includes, at a minimum, these five elements:

Assess Your Financial Situation and Goals

The initial meeting must consist of a thorough assessment of your current financial situation in view of your most important goals. It is here where you and your financial advisor must have a frank and in-depth discussion of what you want to have happen now and, in the future, based on your values, beliefs, and priorities, all of which sets the course for developing and implementing your financial plan.

Establish Long-Term Investment Objectives

Having a clear understanding of your financial goals, your financial profile and your risk profile, your advisor should establish well-defined benchmarks which form the basis of your on-going investment strategy that will help guide you on your choice of a risk vs. return chosen strategy.

Develop Your Asset Allocation Plan

With your benchmarks in place, your advisor should formulate an asset allocation strategy that reflects your risk/return requirements. This involves identifying a mix of investment vehicles within asset classes with the potential to generate the returns dictated by your benchmarks with an acceptable range of portfolio volatility.

Implement the Selected Strategy

With your asset allocation in place, the work begins on constructing your portfolio using select institutional asset class investments to achieve optimum diversification. Institutional investment strategies provide exposure across multiple sectors and geographic regions at a reasonable cost/fee vs. risk vs. expected returns.

Monitor and Shift Your Portfolio

With a sound investment strategy based exclusively on your personal benchmarks in place, there is little reason to track your investments daily, weekly or even monthly.  Instead, you and your advisor should establish regular intervals to review and measure progress and adjust your plan based on any changes in circumstances.

Your financial advisor should clearly explain and document the detail in these five steps. In addition, both his/her and your responsibilities require clear definition. An understanding of the services to be provided in the firm’s engagement agreement is vital to a long-term successful relationship. The client-advisor relationship is defined in large part by an advisor’s ability to provide impartial advice via a fiduciary standard. This fiduciary standard always includes the ability of an advisor to act in your best interest and to fully disclose their compensation and potential conflicts of interest. A successful advisor engagement will be the natural outcome when an honest and open on-going discussion is the chosen format from the beginning.