Is Your Financial Advisor a Good Match?

A traditional notion of a good financial advisor is someone who is savvy about the market's movements and helps clients position their portfolios to capitalize on current conditions. However, when it comes to having a great advisor, most clients value communication skills over market performance.

A 2013 study by The Vanguard Group and The Spectrem Group, which surveyed 3,000 households, found that clients were most likely to leave their financial advisor because of poor communication. Reasons for dissatisfaction included the advisor not returning phone calls and emails in a timely manner, not providing clients with good ideas and advice and not being proactive in contacting clients.

Increasingly, the financial services industry is educating both clients and advisors on relationship-building skills. Edward Gjertsen II is vice president at Mack Investment Securities, headquartered in Northfield, Illinois, and 2015 president of the Financial Planning Association, an industry group for advisors.

Because of the personal information clients reveal in the planning process, their relationships with advisors tend to be up close and personal, Gjertsen says.

"If you're talking about investment advisory work, such as managing a portfolio, that's one emotional level. But when you talk about financial advice and planning, then that's another level, because you're getting more intimate with the client and understanding more about their spending habits, their income. It goes much deeper," he says.

The FPA is one of many organizations that provides investors with lists of questions to ask potential advisors. Among other things, the group recommends clients ask about an advisor's credentials and education, industry experience and how he or she gets paid.

However, Gjertsen says, the process of choosing an advisor goes beyond checking the right boxes and involves an element of "chemistry."

"You are basically putting your full financial life in someone's hands. You want to make sure that the person across from you is a good fit in terms of being a certified financial planner or having the right credentials. But it's important that it's a good emotional fit as well," Gjertsen says.

HighTower Advisors, an independent broker-dealer based in Chicago, also recommends clients ask some key questions before selecting an advisor. "First, is your advisor held to a fiduciary standard? Second, is your advisor, or their firm, free from conflicts of interest? The client needs to drill down and learn more about that, but it's an important question," says Michael Parker, the firm's national director for enterprise development.

The third question to ask, he says, is whether a potential advisor is part of a "captive" platform, limited to only products and services his or her firm approves, and is unable to select other investments on the open market.

"This is a very emotional, passionate subject, and close to our hearts," Parker says.

To further determine whether an advisor is a good fit, Parker recommends looking at the firm's capabilities, its service model, its people and its fee structure. The process of evaluating the team, he says, is where the question of personal chemistry comes into play.

"It's like a marriage. You have to ask if you share the same core values," Parker says. He points out that HighTower's checklist and recommended vetting process are exhaustive, because the decision to work with a particular advisor is so important.

Many of the major custodians -- the brokerages that hold client accounts that are managed by advisors -- now coach advisors on client service and relationships. At Fidelity Institutional Wealth Services, David Canter is executive vice president and head of practice management and consulting.

"Client engagement is one of our key points of view," Canter says.

He notes that regular communication is a means by which advisors can solidify client relationships.

"Some of the best practices we see consist of a steady and ongoing drumbeat of proactive messages. These can be about markets, taxation or various client educational topics," Canter says. He cites an advisor in Southern California who sends out weekly emails with educational content.

He also notes that advisors with good listening skills tend to retain clients, especially if they also do a good job summarizing discussions and listing next steps for both parties. Much of that process, he says, revolves around financial planning, rather than just asset management.

"Firms that don't lead with planning probably have more client attrition," he says. "If the asset management or investment side of the house is what you're leading with, and the investments aren't going well, that's where firms lose clients."

Canter suggests treating the early stages of an advisor relationship similarly to the engagement phase of a relationship, before formally tying the knot.

"Just like when you get married, you want the relationship with your advisor to be one that lasts," he says. "Not that there is a particular happiness quotient, but finding the right advisor can result in both financial and emotional happiness, just like finding the right mate."