Finding a Modern Financial Adviser: 3 Questions to Ask

Whether it’s political unrest, a Black Swan event, a housing crisis or a global pandemic, there are very few “normal” years in the world of finance anymore. In the “post normal economy,” as Barry Ritholtz frames it, financial advisers need to be different than those of yesterday.

Markets are more unpredictable. Volatility has become the norm. Digital asset markets never close. Those are just a few of the elements that have made investing even more challenging. Now, more than ever, it’s important that you have a financial professional on your side who can stop you from making decisions that you might regret. The onset of the pandemic is one example. Nearly all my clients called me wanting to sell out of equities on the exact same day. In the 33 days between February 19 and March 23 the MSCI World Index fell by 34%, and my clients seemingly had reached their breaking point. Did we sell? After a thoughtful discussion the answer is mostly no, and I can tell you that I had many of them thanking me six months later.

My point is that investors’ needs are changing. Financial advisers must continue to adapt and evolve with the individuals and families they serve. While it is also important that your financial adviser is in good standing with the SEC, has high integrity, always puts your best interests first and is an expert when it comes to your financial planning needs, I'd argue that those are table stakes – financial advisers of tomorrow need to be so much more.

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Below is my list of three questions to ask yourself when deciding if a financial adviser possesses the qualities you should have at your disposal in the post-normal economy:

Are they a personality fit?

It’s imperative that your financial adviser can anticipate your needs and understands how you may react to worldly factors that may impact your portfolio. Your financial adviser should take the time to know you on a personal level, not just your portfolio. Do they understand your lifestyle? Your family dynamics? Having a deeper understanding of who you are will help them stay one step ahead and communicate with you on the proper channels during turbulent times.

One anecdote that can help portray my thinking is a story of a client of mine who was extremely politically oriented. When Barack Obama was re-elected to serve his second term, this client wanted to sell everything and wait it out. I was adamantly against selling out of their portfolio and backed up my advice with historical data. Hindsight is 20/20, and I will be the first to admit that I’m not always right, but in this specific case the market yielded strong returns each of the following four years and the Dow Jones Industrial Average notched 118 new highs. The point being, if I didn’t push back, that client would have missed out on market returns that they could never have made up.

Are they able to build a relationship deeper than the adviser-client dynamic?

It all comes down to trust. Do you feel that your financial adviser is going to always act in your best interest? It goes beyond being a fiduciary; you must feel like your financial adviser deeply understands your personal needs and goals. Do you feel that your financial adviser is your confidant? Your friend? They need to be more than that. You should feel like your financial adviser is an extension of your family.

While I don’t believe that you have to loop in your financial adviser for all of life's financial decisions, it’s important that you see them as part of your “inner circle” and that they are not someone who you speak to quarterly to discuss your portfolio and your financial plan. In today’s 24/7, always-on world, your financial adviser should be someone you are communicating with regularly and you connect with them on a personal level.

Are they able to offer a diversified investment portfolio?

In today's market environment it is extremely important to diversify your portfolio outside of stocks and bonds. In fact, the traditional 60/40 portfolio is dead. If your financial adviser isn’t providing creative strategies to diversify your portfolio and invest in alternative assets, then they aren’t providing their clients with modern financial advice.

Investors need an inflation hedge and an alternative to fixed income and traditional equities.

To truly diversify, and give yourself the opportunity to experience outsized returns, you need to be investing in alternatives, including venture capital, real estate and private equity.

Amid the Ukraine-Russia war and coming off the heels of a global pandemic, it’s impossible to predict the next crisis that will rattle the markets. But there’s one thing for certain – there's nothing “normal” about your financial life. To protect yourself and your hard-earned portfolio, make sure you are working with a financial adviser who possesses the above qualities. If there’s anything to be picky about in life, your financial adviser should be at or near the top of the list.