Read this timely article if you are planning to change financial advisers or select your first adviser in the first quarter of 2017.
How do you find a competent, ethical financial adviser you can trust? If you are replacing an adviser, how do you avoid making the same mistake twice? If you are selecting your first financial adviser, how do you minimize your risk of making a catastrophic mistake?
If this is your first experience selecting a financial adviser, you are more likely to buy investment and insurance products from salesmen who initiate contact with you. This makes the process easy – you don’t have to do any work. You simply interview them and buy from the person you like the best.
On the other hand, if you are replacing a financial adviser there is a good chance you had a bad experience with your previous, terminated adviser. In this case, you are more likely to use a process that helps you select the best adviser, not the adviser with the best sales skills.
You are more cautious because the easy process, that is dominated by salesmen, did not work.
Salesmen vs Advisors
Salesmen are trained to initiate contact with investors using various sales tactics: Telemarketing, direct mail, free seminars, etc. This is a disruptive form of marketing because most investors do not want to be contacted by salesmen they do not know.
The good news is there are financial advisers whose principal skills are planning and investing and not selling. In fact, a pretty high percentage of theses advisers do not even like the sales process. These professionals do not consider it a good use of their time. They would rather be producing financial plans and investing client assets.
A note of caution. There is no regulation that prevents salesmen from calling themselves financial advisers – if it reduces your sales resistance.
Why Avoid Salesmen?
There is a substantial amount of risk when financial advisers contact you.
Are they salesmen or real advisers?
In our 2016 survey, 85.3% of investors said they did not want salesmen investing their assets. These are experienced investors who may have had bad experiences in the past.
Salesmen create unnecessary risk for the following reasons.
- They are trained to tell you what you want to hear. For example, salesmen may say they can produce high returns for low risk. This is impossible. High returns require high exposure to risk of loss.
- They create high expectations in their sales pitches. And, since the pitches are verbal, you have no record of what was said to you.
- They are trained to withhold information that may cause you to reject their sales recommendations. For example, a new salesmen will not volunteer he was selling cars three months ago.
- They are paid commissions at the time of the sale. They have no vested interest in the outcomes of the expectations they created during their sales processes.
It is vital that you know the difference between salesmen and financial advisers.
Why Use the Internet?
The Internet is the game-changer you have been waiting for. It puts control of the process back into your hands with the click of a mouse. That’s because you can use the Internet to find and research financial advisers while maintaining your anonymity. It is up to you to initiate contact by visiting adviser websites, learning more, and using their Contact Us function.
You also limit the impact of the financial professional’s sales skills when you base your selection decision on information that you find on the Internet.
You are no longer limited to the salesmen who contact you.
Who Controls the Process?
Experienced investors want control over their selection processes. They want to select the financial advisers they talk to and not the other way around. Most importantly, they do not want to be limited to salesmen who contact them.
If you do not control your selection process, the financial professional will do that for you.
Financial Adviser Websites
The best financial advisers practice transparency on their websites. That is, they provide the key information you need to conduct your online research.
Low quality financial adviser websites are nothing more than online sales brochures. There is a lot of sales content and very little substance.
Top quality financial adviser websites are different. They provide facts for their credentials, ethics, business practices, and services. For example:
- Biographies for key financial professionals
- Access to their compliance records
- Descriptions of their financial services
- Descriptions of their primary types of clients
- How they are compensated
- What their services cost
- How they communicate with their clients
Name Search
Another popular way to use the Internet to research financial advisers is conducting name searches on Google. To be thorough, you should also enter the name of the adviser’s firm in Google.
What exactly are you looking for?
From a positive point of view you are looking for articles that have been written by advisers and articles that have been written about advisers.
You should assume advisers who have specialized financial knowledge are more likely to write financial articles. You should also assume salesmen are less likely to write articles.
You can also enter keywords with the advisers’ names to look for problems. For example: Scam, fraud, fine, censure, termination, lawsuit, bankruptcy, and foreclosure.
At a minimum, you should scan the articles to help you assess the adviser’s level of expertise and how he communicates with investors.
Your Anonymity
One of the primary benefits of the Internet is maintaining your anonymity while you find financial advisers and learn more about them.
You initiate contact when you are ready to talk to an adviser. The simplest way to reach the adviser is the Contact Us function on his website. You can review the content on the site and initiate contact by clicking on a button.
When you use Contact us, you can limit initial contact to email or provide comments describing how you prefer to be contacted.
Best of all, no one is trying to sell you financial products while you find advisers and conduct your research.
Contacting Advisers
Our survey showed an anomaly – 62.4% of investors were reluctant to initiate contact with financial advisers. This defeats the purpose of a process that is controlled by investors.
Investors’ biggest concern was the high-pressure sales tactics that were frequently associated with the financial service industry.
However, the foundation of this concern is the tactics that are used by aggressive salesmen who initiate contact with investors. You already know, one of your options, is to exclude this type of salesmen from your selection processes.
How do you know they are salesmen? You read their biographies on their websites.
- No biography?
- No education?
- No experience?
- No certifications?
- No high-quality association memberships?
Exclude them from your search.
Initiating contact does not mean you are exposed to aggressive sales tactics. Your focus should be advisers who are financial fiduciaries who provide financial advice and services for fees.