What to look for in an Advisor & Why it matters

How do I find a REAL advisor?

This is a question we face from time-to-time. Unfortunately, consumers are inundated with more options than they can possibly consider when it comes to looking for financial guidance. There are banks, wirehouses, brokerage firms, insurance companies, accountants and other advisors all marketed as potential suitors to help serve individuals, businesses and their various financial needs. For most families all of the options and companies to choose from does nothing but create confusion and anxiety. Many advisors have a tendency to say a lot while at the same time saying nothing at all! With all of these options, how is someone supposed to tune out the noise and focus on what they actually need, not just what the financial services firm wants? With various incentives to sign-up for this account or that short-term benefit a bank or broker is offering it can be hard to know if you are doing what is right or a short-term transactional need.

To improve consumer education and better equip investors to make decisions that best fit their needs they first need to know what to look for in an advisor. To do this, several key considerations - at a minimum - should be evaluated. Choosing the right person to entrust the guidance of your and your family’s financial future can change your life for the better.

Below is a list of key steps and questions anyone looking for a “REAL” advisor should consider in their process.

#1: Look Within

Before anyone can really know what to look for in an advisor, they must first look within.

  • What do you need from your financial picture to achieve the things that are most important to you?

  • What are the things worth working towards?

  • What resources do you have at your disposal to turn those goals into reality?

  • What are your limitations and where might you need help?

  • Do the demands of your daily life prevent you from responsibly caring for your finances better than someone with expertise in a variety of areas would? Maybe you can do it all, maybe you need help.

  • Where in your financial life can you benefit from receiving professional advice?

  • Even if you believe to have it all figured out, could you still benefit from having a someone in your corner to share ideas with and offer their perspective?

  • Do you need a professional to offer access to certain tools and insight you may not have at your own disposal?

Once these questions (and others) have been adequately addressed, only then can you begin to determine whether you truly need outside help. If you feel that you may, it then often make sense to start evaluating what to look for in an advisor.

#2: What are their qualifications?

At Hudson Oak Wealth Advisory we believe that most consumers deserve a higher standard in receiving real financial advice than they have traditionally been offered. For too long, “advisors” have only been required to hold the bare minimum securities licenses required to give advice. We encourage prospective clients and investors to demand a higher level of evidence of professional competency.

Does your advisor have advanced credentials proving a minimum level of knowledge and competency? Are they a CPA? A CFP® (certified financial planner)? How about a CFA? Do they have a masters degree or an MBA? While to our firm we believe these questions are valid because they prove a minimum level of competency that is acceptable to deal with someone’s life savings and financial future, to others this may not be of the utmost importance. Regardless, it is something that should be at least considered. Bear in mind however, just because someone has a specific credential, such as a CFP®, it does not mean they are bound to serve you in an independent way. A credential proves a certain level of competency and intellect - it does not guarantee they are required to use those skills in alignment with your best interest. A very important distinction for consumers to understand.

Does the advisor have years of experience? If so, what kind of experience? Is their background well-rounded enough to address the variety of tasks and advice your complex life may demand? If you are a business owner or a high-earner then tax planning may be quite important to you, an advisor that has worked as a tax professional may be a good fit. If deep investment analysis is most valuable, then perhaps a former investment analyst is necessary.

All-in-all, you as a consumer deserve a minimum standard when receiving advice. A standard that has often been too low throughout the financial advice industry. Most folks would not visit a dentist who had not gone to dental school or seek serious legal advice from someone who was not an attorney. Why settle for anything less when seeking counsel and guidance regarding your finances? Seeking the guidance of those that have appropriate credentials and experience can help ensure you are at a minimum, working with someone who possesses technical skills and competencies to serve your needs. This can provide peace of mind, which can be priceless.

#3: What is their expertise?

No two advisors are exactly alike. While many advisors can have similar backgrounds, some advisors will specialize in one or several key areas. If working with an advisor who specializes in assisting local small business owners is important to you - you should require that as a pre-requisite to working together. The same goes for any other area of your life that requires expert attention. This can range from needing assistance with concentrated employer stock, managing sudden or unexpected wealth, getting advice from someone who exclusively works with professionals in your industry, and more. At Hudson Oak Wealth Advisory we work with folks from many walks of life thanks to our comprehensive background, however we do have areas that we specialize in which makes a difference to those facing very specific issues.

#4: How are they compensated?

How does an advisor get paid? Is the advisor you are considering compensated only by you, directly? Or are they compensated through commission or revenue sharing if they sell you an insurance product, investment product or banking package? Advisors that do not work for banks, insurance firms or wirehouses in many cases can still broker some or all of the same products as those that do - thus making the equation ever more confusing for the end consumer! Many seemingly “independent” providers of advice are in-fact compensated in part by the investment products they choose to invest their client’s money. Further, many advisors at brokerage houses and large institutions are incentivized to switch firms every so often as a new firm will pay the advisor a fee to move their business to them. Do you want to work with an advisor that may leverage your relationship with them to get paid regardless of whether or not it may be the best option for you?

With the term “fiduciary” being thrown around all too casually these days, how can a client ensure they are working with someone who is bound to operate in their best interest and have minimal conflicts of interest? A basic way to cut to the heart of the issue is to simply ask: are you a fee-ONLY fiduciary? If the answer is “yes” you can rest assured that at a minimum you would be working with someone who does not have compensation conflicts. Any other answer or hesitation, may require deeper diligence to understand how the advisor is actually paid. The most important part however is that you - the consumer are informed and have the opportunity to make that decision for yourself.

#5: Where does the advisor work? Is this important?

Does the advisor work at a large firm with thousands of clients? Does the advisor manage a boutique firm of very specific clients? Is it something in the middle? While these are important considerations, perhaps more important is to understand the ownership structure of the firm where the advisor chooses to work is equally important. Smaller firms may not have the bandwidth to meet some technical needs of clients, however almost all larger firms have outside shareholders, private equity ownership, or other silent partners that can influence how an advisor must work with clients in order to meet revenue goals.

These days, thanks to technology, advisory firms of all sizes that leverage tools and resources properly can compete with one another like never before. To some folks, they will always want the name-brand firm they see in commercials, despite the fact that firm may be plagued with conflicts of interest. To others, they may prefer the close bond of working with a local advisor they know and trust will always be there for them. We encourage those looking for advice to look beyond a name and at the end of the day, consider the advisor’s experience and resources. As whether you choose to work with an advisor who is at a large firm or small shop, in the end providing and receiving financial advice is a deeply personal relationship.

#6: Most importantly - Do their actions speak louder than their words? Do they listen to your needs?

While you can interview an advisor and ask all of the right questions, it is often too easy for someone to tell you what you want to hear. Try and ask for evidence of their work where possible and for ways they can prove to you that they are the right fit. Have them prove they are a fiduciary and have removed as many conflicts are possible, if this is important to you. Review their regulatory filings and take the time to understand how they are compensated. Do they hear what you say is important to you? Even after all of this, there will be some level of uncertainty until they are able to prove their worth through their actions. This will always require some level of a leap of faith and trust.

Why does this matter?

The questions laid out above are just some of the basic points to consider. We, at Hudson Oak, do not presume to have the perfect solution for all clients. Further, any advisory firm that does claim to do so, is likely being disingenuous. As the financial advice industry has evolved, there have been structural limitations, lobbyists promoting controversial regulations, and many new rules that make it nearly impossible for firms to be a perfect fir for everyone’s needs at all times. All firms have some flaws, some more than others. It is important for an individual or business looking for advice to understand the options available and make an informed decision that best fits their needs.

Despite an industry that should do so much good for so many people, most firms fall short in doing “the right thing” in favor of pursuing profit. The best firms are able to strike an appropriate balance - something we strive for at Hudson Oak. We encourage those looking for advice however, don’t give up hope! Real advisors DO EXIST and want to help. It can be a tiresome process to find someone that checks all the boxes, but we insist that they do in fact exist if you know where to look. In our opinion resources such as NAPFA, the Fee-Only Network, and XY Planning Network are great starting points. If you do your homework you can find a true, qualified professional to provide legitimate advice and guidance. It can change your life for the better and will have been worth the search.

These are the questions to ask to help determine who is worthy of assisting you with your wealth and financial goals. As a result, if you find the right person that can give you true advice and assistance that you need, it will often pay for itself many times over, over many years. It is the standard you deserve, and which we strive to provide for those we serve. If you are interested in seeing if we may be a fit to have the privilege of serving your advisory and planning needs, or simply need help being pointed in the right direction, we encourage you to contact us.

Disclosure: Hudson Oak Wealth Advisory LLC (“Hudson Oak” or “Hudson Oak Wealth”) is a registered investment adviser in the State of New Jersey. For information pertaining to Hudson Oak’s registration status, its fees and services and/or a copy of our Form ADV disclosure statement, please contact Hudson Oak. A full description of the firm’s business operations and service offerings is contained in Part 2A of Form ADV. Please read this Part 2A carefully before you invest. This article contains content that is not suitable for everyone and is limited to the dissemination of general information pertaining to Hudson Oak’s Wealth Advisory & Management, Financial Planning and Investment services. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this presentation will come to pass. Investments involve risks and may lose value. Figures displayed within this communication are for illustrative purposes only. Nothing contained herein should be interpreted as legal, tax or accounting advice nor should it be construed as personalized Wealth Advisory & Management, Financial Planning, Tax, Investing, or other advice. For legal, tax and accounting-related matters, we recommend that you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized planning from Hudson Oak. The content is current only as of the date on which this article was written. The statements and opinions expressed are subject to change without notice based on changes in the law and other conditions.