The Informed Investor

Define Your Objectives to Choose the Right Financial Advisor

In the late ‘90s, my wife and I began hunting for a new house. We loved our little home near the south end of Lake Harriet in Minneapolis, but it was quickly becoming too cramped for our family of five. There was always a toy underfoot, and it constantly felt like we were tripping over each other.

At the time, the housing market was very tight. There wasn’t much on the market, and houses tended to be snapped up quickly. Because of housing market conditions, we kept our criteria minimal, only telling our realtor that we wanted a place near Lake Harriet. That’s it.

I’m sure I toured at least 30 houses over several weeks. Every time we stepped through the door of a new place, my wife and I felt hopeful, but our optimism was usually quashed immediately. Nothing was quite right—too small, too big, too run-down, insufficient space in the kitchen or living room, not enough bedrooms, a cramped yard, a busy street. We were striking out left and right.

Then, we decided to take a different approach. Instead of being loose with our criteria, I made a spreadsheet that detailed exactly what we wanted—our needs, wants, and “nice to haves.” My wife and I put a lot of thought into our chart, making sure to list all the factors that were important to us. We knew we needed five bedrooms, two bathrooms, a house in good repair, and someplace located close to Lake Harriet. In the “wants” column, we listed items such as a garage and a big yard because they were not absolute necessities for us. In the “nice to have” column, we listed features such as a swimming pool and a sauna.

After defining our list, we brought it to our realtor. I worried he might think we were seeking a unicorn, but instead, he surprised us by saying, “I think I have the perfect house for you. It’s not yet on the market, but I think I can convince the owner to let you take a look.”

Once we had permission to tour the house, my wife and I visited it. As soon as we stepped through the door, we knew it was the one. It ticked all the boxes on our “needs” list, fit most of the criteria on the “wants” list, and had a few of the “nice to haves.” It even had a sauna! We’ve lived in that house for 25 years. It’s where our three kids grew up, where we hosted friends and family, worked, relaxed, and made memories.

I learned through this experience that dialing in your needs, wants, and nice-to-haves when making a significant decision is incredibly valuable. This applies to buying a house or car, choosing a new doctor, or—and maybe you saw this coming—choosing a financial advisor. 

Why Set Defining Objectives When Choosing a Financial Advisor?

As a financial advisor, it is always a relief when prospective clients know what they want. If someone can tell me what kind of help they are seeking, what type of advisor they would like to work with, and their vision of an ideal financial advisory firm, I can usually tell whether or not we’ll be a match (and if we’re not, I can easily refer them to someone who is a match). When you know what you need, searching for the right financial advisor is much easier.

Defining objectives gives you clarity, keeps you focused on the aspects that are most important to you, and makes it easier for you to find an advisor who is qualified to serve you. It also allows you to weed out advisors who don’t match your needs. For example, if you are looking for a financial planner who specializes in estate planning, you can avoid advisors who don’t offer such services and focus on those who do. This helps you avoid wasting time and energy on advisors who might not be the right fit. Once you have narrowed your list of prospective advisors, you can begin making phone calls and arranging in-person meetings.

Setting Defining Objectives 

When choosing a financial advisor, there are several key factors to consider. For one, you need to determine what kind of help you need. Are you looking for someone to manage your investments, help you navigate estate planning, provide advice on retirement planning, or all of the above? You’ll also need to consider whether you prefer to work with an individual advisor or a larger financial firm

You will also need to consider the characteristics of your ideal advisor. Is the advisor a fiduciary? What is the fee structure? What certifications and other credentials does the advisor have? Is the advisor part of a larger financial institution? Conveniently located and easy to contact? Answering these questions before you start your search can help you quickly identify the right financial advisor.

Which Defining Objectives to Consider

Setting your defining objectives—those needs, wants, and nice to haves—can seem overwhelming to many people. Where do you begin? What areas do you need to consider? I suggest following these four steps:

1. Identify Your Purpose

Something prompted you to consider working with a financial advisor. What was it? Are you thinking about retirement planning? Did you inherit some money? Are you concerned about funding your children’s college education? Alternatively, are you fed up with your current financial advisor and need a change?

Whatever the case, reflecting on the main reason you’re searching for a financial advisor is important. Keep that purpose in mind as you begin to list your needs, wants, and nice-to- haves.

2. Ask the Big Questions First

Start by asking yourself big-picture questions first. These could include:

  • What are my main financial goals?
  • What type of financial help do I need? Do I require financial planning, wealth management, or a combination of the two?
  • What type of financial advisor am I seeking? (individual vs. team, fee-only vs. commission-based or fee-based, qualifications and professional certifications, etc.)
  • Do I require any special services (income tax planning, charitable giving advice, help with international tax laws, etc.)

3. Think About Key Financial Planning Areas

Make a list of your needs and discuss those items with a prospective financial advisor.

If you’re interested in financial planning assistance, it can be helpful to consider the main areas that a financial planner can address

  • Financial Statement Preparation and Analysis
  • Investment Planning and Risk Management 
  • Employee Benefits
  • Investment Planning
  • Income Tax Planning 
  • Retirement Planning
  • Estate Planning 

Utilize Resources

If you’re unsure of how to begin defining your financial objectives, you can always utilize resources that are available through financial institutions or from various educational websites such as checklists and financial worksheets. Just be wary of any checklists or worksheets that require you to give away your personal information to view them.

Setting clear objectives when choosing a financial advisor is essential to a successful search. Know what kind of help you need, define what characteristics the prospective advisor should have, and make sure you communicate your needs and wants clearly. Doing these things will not only save you time and energy but also ensures that you’ll find a financial advisor who is qualified to serve you. Just as my wife and I found the perfect house by narrowly defining our search criteria, you too will benefit by knowing the exact characteristics you are looking for in a financial advisor.

 

Learn more about David Bromelkamp

 

Hello! I’m Dave, the founder and chief executive officer of Allodium Investment Consultants, located in Minneapolis, MN. I am also the author of AdvisorSmart for the Individual Investor: Your Guide to Selecting a Financial Advisor to Get Better Financial Advice. I enjoy educating individual and institutional investors about financial planning and investing. When I’m not helping people make investment decisions, I enjoy traveling, hiking and spending time with my wife and family.

 

 

The information provided is for educational purposes only and is not intended to be, and should not be construed as, investment, legal or tax advice. Allodium makes no warranties with regard to the information or results obtained by its use and disclaim any liability arising out of your use of or reliance on the information. It should not be construed as an offer, solicitation or recommendation to make an investment. The information is subject to change and, although based upon information that Allodium considers reliable, is not guaranteed as to accuracy or completeness. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment.