Evaluating Advisors
Once you've found two or three advisors who appear to meet your requirements, the next step is evaluating their qualifications to make sure they have the knowledge, ethics, and business practices you need to achieve your financial goals.
Why is the Evaluation Process so Difficult?
Evaluating advisor quality is never easy because competence, integrity, and business practices are very tough to measure. Plus, less scrupulous advisors use their relationship and sales skills to obscure information that would help you evaluate their quality and services.
Personalities & Sales Skills
A positive personality could mean the advisor is a nice person, or it could mean the advisor has excellent relationship and sales skills. It's critical that you know personality has nothing to do with competence and integrity.
Sales Presentations
You cannot rely on the information in sales presentations when you evaluate advisors because they control what you see and hear. You will not get the information you need to make the right decision. You will only be given information that helps advisors win your assets.
Comparative Data
There's another problem when advisors control the data that you'll use to make your selection decision. All of their presentations will be different making it next to impossible to compare their answers. That's good for weaker advisors and bad for you.
Questions & Answers
You have to know the right questions to ask to obtain the information you need. Plus, you have to know good answers from bad ones. Only then are you prepared to evaluate advisors on your own terms.
Written Responses
All important information that documents the advisors' credentials, ethics, and business practices must be submitted in writing. You cannot rely entirely on verbal information for a decision of this magnitude. Written records are permanent and tough to deny later. Verbal input is too easy to deny later.
Preliminary Information
All advisors should provide written information to you in advance of the first meeting. This gives you a chance to review their information without being influenced by their personalities and sales skills.
Compliance Histories
Always check the compliance history of the advisors with the applicable regulatory agencies: SEC, NASD, and various State Agencies.
