At Kubera, we serve tens of thousands of high-net-worth users and hundreds of financial advisors with our modern wealth tracking and client portal software solutions. We often hear questions from our high net worth individual (HNWI) users about whether or not they should hire a financial advisor, and sometimes they even ask us to make introductions to financial advisors.
When it comes to managing your money, it's crucial to find the right financial advisor to help guide you. Great financial advisors can help you navigate complex financial markets, and help you with your investment decisions, estate planning and tax planning among other things.
However, the process of finding the right advisor can be just as tricky as finding the right therapist. In this article, we'll explore the similarities between hiring a financial advisor and a therapist, and give you some practical tips and actionable advice on how to find the right advisor for you.
Just like when you're hiring a therapist, the most important thing is to find someone you can trust and connect with.
Optimize for the "human" you'll be working with
When it comes to hiring a financial advisor, it's important to focus on the person you'll be working with, not the company they represent. Just like when you're hiring a therapist, the most important thing is to find someone you can trust and connect with. It's especially tricky if you're working with a larger firm, as the "sales pitch" may be done by senior folks, but you may end up working with someone else entirely. So, always optimize for the person you'll be working with (unless you're going for "robo advisors").
Character is key
Once you've identified the "human" you'll be working with, the most important thing to evaluate is their character. Trusting your advisor is crucial, as it will be critical in your journey. You won't make any progress in therapy if you don't trust your therapist, and the same is true with a financial advisor. To test an advisor's character, you can use techniques such as those listed in this article.
Trust is more important than brand, education, and other factors
In today's world, there's a wealth of financial information available online, so you don't need yet another person to inundate you with numbers and facts. The best financial advisors will help you with "behavioral finance," preventing you from making costly mistakes. A good "behavioral finance" advisor will help you understand and overcome the emotional and cognitive biases that can lead to poor financial decision making.
This is why trusting a financial advisor is more important than brand, education, or other factors when it comes to hiring a financial advisor. A trustworthy advisor who understands your needs and goals and can help you overcome the behavioral obstacles that may hinder your financial success is crucial. They will be able to guide you through the complex world of finance and help you make sound financial decisions that align with your goals and values.
If your advisor is not taking notes or doing background work, it's a red flag that they may not be fully committed to your financial success.
Providing a safe space
A good financial advisor will provide you with a safe space to discuss anything about your financial life, even if you find it embarrassing to talk about. For example, if the question of charitable contributions comes up, but you're not feeling particularly charitable at the moment, you should be able to openly express your needs without feeling judged. Similarly, you should be able to openly share that you lost a bunch of money trading dog coins without feeling judged.
Taking notes and doing background work
When looking for a financial advisor, it's important to find someone who is dedicated to your financial well-being. One way to gauge this is by observing how they prepare for meetings with you. Just like a good therapist, a good financial advisor will listen, take copious amounts of notes, and do background work before your next meeting. This shows that they are invested in understanding your financial situation and identifying ways to help you achieve your goals.
If your advisor is not taking notes or doing background work, it's a red flag that they may not be fully committed to your financial success. A financial advisor that takes the time to understand your needs and goals, and prepares accordingly is more likely to help you make sound financial decisions and achieve your financial objectives.
Avoid advisors who intimidate you with facts and name-dropping
When it comes to hiring a financial advisor, it's important to avoid those who try to intimidate you with jargon and complex concepts. A bad advisor may try to prove their worth by bombarding you with arcane numbers and Monte Carlo simulations, but in reality, they may not have your best interests in mind. Instead of trying to understand and explain the concepts to you, they may just be trying to make themselves look more sophisticated.
If you find yourself feeling overwhelmed by the information or language being used, it's important to be cautious and question if this is the right advisor for you. A good financial advisor will explain things in simple terms and make sure you understand the concepts being discussed, so that you can make informed decisions about your finances.
Fee only financial planners charge a fee for their services, rather than earning commission from the sale of financial products. This ensures that their advice is unbiased and in the best interest of the client.
Fee-only advisors
If you're considering hiring a financial advisor, one important factor to consider is their compensation model. Fee only financial planners charge a fee for their services, rather than earning commission from the sale of financial products. This ensures that their advice is unbiased and in the best interest of the client.
When you hire a fee-only advisor, you can be confident that they are not motivated to recommend products that earn them a commission, rather than products that are best for you. If possible, it's best to hire a fee-only advisor to ensure that your financial goals are the top priority.
In the world of ultra high-net-worth and high-net-worth financial advice, advisors and RIA firms typically charge a AUM based fee, i.e. a percentage of your assets under management (AUM) as a fee. At the same time, several fee only financial advisors charge a flat fee to their clients.
Share and collaborate on the “complete picture”
Your success with a therapist will largely depend on you sharing a “complete picture” of yourself, including your goals, aspirations and your insecurities. The same is true when it comes to working with a financial advisor. If your wealth advisor does not have your “complete financial picture”, their advice will not be as effective.
Many advisors only get an incomplete picture of their client’s net worth, only those aspects of the wealth that they are “managing”. This results in blind spots for both you and your advisor. Your advisor should have a 360-degree view of your personal balance sheet, whether it is part of their AUM or not. They should know about all your vacation homes, crypto wallets, loans given to friends and family, etc. The more they know about your complete financial picture, the better they can advise you.
A live wealth tracker like Kubera can help you and your advisor collaborate efficiently on the complete picture. With Kubera, all your wealth is brought together in a single dashboard, making it easy for your advisor to get a comprehensive view of your financial situation. This way, they can provide you with more accurate and relevant advice, helping you achieve your financial goals.
Reference check
When looking for a financial advisor, it's important to do your due diligence and research potential candidates thoroughly. One important step in the process is to conduct reference checks. Just like when you're hiring a therapist, you want to get a sense of the advisor's reputation and track record.
Reach out to current or past clients and ask about their experience working with the advisor. Ask about their communication style, approach to financial planning, and whether they were able to achieve their financial goals.
It's also a good idea to check the advisor's credentials and disciplinary history on FINRA's BrokerCheck or the SEC's Investment Adviser Public Disclosure (IAPD) website. Conducting reference checks will give you a better idea of the advisor's qualifications and experience, how they have helped other clients and which financial institutions or custodians they are affiliated with.
Conclusion
Hiring a financial advisor can be just as tricky as hiring a therapist, but by following the tips and advice outlined in this post, you can increase your chances of finding the right advisor for you.
At Kubera, we believe it's important to optimize for the "human" you'll be working with, and to focus on their character over their brand, education, or other factors.
A good financial advisor will help you navigate the world of behavioral finance, provide a safe space for discussing your financial life, take notes and do background work, and avoid intimidating you with jargon and complex concepts. By conducting reference checks, hiring a fee-only advisor, and looking for an advisor who understands your needs and goals, you can increase your chances of finding the right advisor for you. With the right financial advisor by your side, you can achieve your financial goals and make sound financial decisions.
Trusted Financial Advisors powered by Kubera
At Kubera, we understand that the financial advisor selection process can get tedious and time consuming for our subscribers. So, we are happy to help.
Existing Kubera subscribers can reach out to us via in-app support, or in our exclusive subscriber Discord channels and we would be happy to recommend to you vetted and trustworthy financial advisors, RIA firms and certified financial planners who use a modern technology stack that includes Kubera.
This is a high touch service we offer to our privileged subscribers, and there are no commissions or payouts involved - just objective and unadulterated advice to help you progress towards your financial goals.
