When it comes to one’s physical well-being, it is common knowledge that a healthy diet, regular exercise and annual check-up with your doctor are the basics. In times of illness or disease, treatment is usually objective and based on medical science, so your medical professional should be able to explain in facts what is going on and what needs or doesn’t need to be done.
However, when it comes one’s financial health, it can be a world of subjectivity, perceptions and projections. This can make managing your own investments complicated, and finding a good financial advisor more difficult. Before committing your hard-earned assets and investments, it is important to “interview” your potential advisor, just as you would a potential employee. Here are five things to look for when choosing a Financial Advisor (FA).
This is probably the most important quality to look for – and the toughest to evaluate, especially without the benefit of time and experience working with someone. In some cases, you may have a family member or friend who has been working with an FA and can vouch for them. Such referrals can help build trust, but they should also be evaluated alongside other information. Consider the following:
- What information can you find out about them online? The website of the FA and their firm can be a nice starting point to find out about their qualifications, history, and services offered, amongst other things. However, a more formal record of the individual and the firm’s record can be found on the FINRA BrokerCheck. This is a free tool that will display the full history and compliance record of the individual and the firm. This means that any violations committed by the FA will show up on their record.
- Is the advisor a Fiduciary? Fiduciary Advisors are legally obligated to put their clients’ financial interests above their own, and they must disclose how they are compensated and avoid potential conflicts of interest that could affect the recommendations they make. One simple way to know if an advisor is a Fiduciary is to simply ask. As a rule of thumb, most fiduciaries are compensated via clearly disclosed fees and not based on commission or a per transaction basis. You can also review an advisor’s firm’s Form CRS or their ADV brochure and any brochure supplement your financial professional provides.
Although not an industry requirement, most investment firms require advisors to have a minimum of a bachelor’s degree; any degree beyond that is of course an asset. Subsequently, there are also several professional licences which must be obtained before anyone can be registered as an FA, and to allow them to sell certain products and provide specific services. In the U.S., every advisor must pass the Uniform Investment Adviser Law Examination aka Series 65 or have a series 7 and 66 which allows them to conduct business in different states and charge an advisory fee. Advisors can further their qualifications by obtaining designations such as Certified Financial Planner (CFP), a formal recognition of expertise in the areas of financial planning, taxes, insurance, estate planning, and retirement; or Chartered Financial Analyst (CFA), one of the most respected designations in finance that is widely considered to be the gold standard in the field of investment analysis. There are also other related types of designations, all of which specialize in different areas of expertise. Client should have a general understanding of what an advisor’s qualifications mean and how it fits with their financial needs.
Not every client is the same, nor are all market cycles the same. Having an advisor who has had experience working with clients that have similar needs and requirements as yours is important. For example, if a client has ethical and/or religious restrictions on how their money is invested, it is important that the advisor is familiar with this, and previous experience working with similar clients is very helpful. In addition, working with an advisor and firm that has been through a variety of market and economic cycles can be a huge asset. This is because the experience helps both in terms of investment strategy and the hand holding that advisors must do with clients during down markets.
Communication is probably the most overlooked quality, yet it is the one that typically will end advisor-client relationships when not functioning correctly. Good communication skills are vital for advisors to be able to communicate their message, strategy and advice to their clients in an effective way. Frequency also matters. With today’s technology, it is easy to quickly touch base via a text, email or social media, but a good advisor will also pre-book his next call, meeting and/or review with the client to discuss their portfolio and situation. The exact frequency can vary depending on the advisor, client and their situations; however, an annual review is a must. Pro tip: a sign of a good advisor is when they proactively reach out to clients during major downturns in the market.
Understanding the Big Picture
Ultimately, this always comes down to the objectives and goals of the client. A good advisor must be attentive to this and be able to see the “Big Picture”. From the client’s perspective, one way to tell if an FA has your personal goals in mind is to consider the questions he or she asks. A good advisor asks a lot of questions. This is because the advisor’s job is to assess, analyze and then formulate a recommendation, and none of this is possible without properly understanding the client
At ShariaPortfolio, our goal is to provide trustworthy, experienced, and qualified advisors to help clients reach their financial objectives while being keenly aware of their religious beliefs and personal goals. For more information about how we could help you, contact one of our financial advisors today.
Investing in securities involves risk, and there is always the potential of losing money when you invest in securities.
Halal compliant investments, diversification and asset allocation do not ensure a profit or protect against loss.
This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.