The Bay Area Financial Advisor for Tech Professionals & Entrepreneurs

“Who do you work for?” is one of the most important questions you can ask of a potential advisor. Most people who call themselves financial advisors owe their primary allegiance to the company they work for or the product vendor they represent rather than the customers they serve. Legally, these are sales professionals. Whatever their business card may say, insurance agents and stockbrokers fall into this category. The legal obligations these individuals have toward their customers are specific and limited. They’re not required to disclose potential conflicts of interest or to recommend the “best” product available to a customer, only a “suitable” one.

On the other hand, representatives of a Registered Investment Advisor (RIA) firm work directly for their clients and have an open-ended, fiduciary responsibility toward them. Such Investment Advisor Representatives must disclose any potential conflicts of interest to their clients, so those clients can evaluate the context of the advice they are being given. If recommending a product, these advisors are required to recommend what they consider to be the “best” product and not merely a “suitable” or acceptable one.

Individual advisory firms offer very different kinds and combinations of services. You’ll need to do some digging to determine whether a prospective advisor’s services are right for your needs and goals.

There’s nothing inherently wrong with the idea that different kinds and combinations of financial services are available to consumers. The challenge is that it can be hard for consumers to determine what they’re going to get when they’re looking for financial advice. Here are several questions you can ask to help determine what services an advisor you’re considering actually delivers:

• Do you provide general financial advisory (i.e., financial planning) services, or investment management services, or both?
• If you provide both, which is your core activity? (Hint: It’s always one or the other.)
• If you provide both, do you largely outsource one of them?
• If you provide financial planning, how do you present your advice to clients? For example, do you deliver a single written document or rather a series of modular recommendations over time?
• Do you provide financial planning services that address a broad range of client situations, or do you specialize in one specific area, e.g., college planning?
• Is your assistance a one-time event or are you available to advise your clients on an ongoing basis?
• Do you charge an extra fee for financial planning, or is it part of what your clients are already paying for?
• Are you available to help clients implement your recommendations? If such recommendations involve products, do you also receive compensation for recommending or providing them to clients?

While working with a nationally branded firm might sound comforting, many national firms employ a large number of recent graduates who don’t have a lot of experience. It’s in smaller, boutique firms that advisors with more experience are frequently found. Keep in mind that you’ll be working with an individual and not just a company, so it makes sense to ask about the background, experience, and training of the advisor that you’d actually be working with.

Here are several questions you can ask of the advisor:

• Do you have a college degree? What did you study?
• Do you have a graduate degree in economics, business or finance?
• What kind of professional credentials do you have? Are you a Certified Financial Planner® (CFP®) professional?
• How much (and what kind of) general business experience do you have?
• How much experience do you have as a Financial Advisor?

Think twice about engaging an individual who says that she or he is a “retirement specialist” if that person doesn’t have a relevant degree or any professional qualifications. Too often such people are simply sales pros masquerading as advisors.

In addition to “hard” skills and experience, however, there is also a more personal side to things. An advisor’s personal attitudes and approach can make all the difference in whether or not you’d enjoy a productive relationship. Consider the following:

• Will this person listen to me and try to understand my perspective?
• Can this person appreciate experiences other than his or her own?
• Has this advisor had experience working with people like me?
• Does this person have personal life experience that will be helpful to me?
• Do I trust this individual to be respectful, honest, and fair?

There are basically two different ways for a financial advisor to be paid. The first is to be paid for selling a product. The second is to be paid directly for providing financial advice. As we’ve seen, individuals who make money primarily by selling products might also provide advice and refer to themselves primarily as financial advisors. Yet because it’s sales rather than advice that they’re getting paid for, there’s always the possibility that they’ll focus on that aspect of what they do rather than focusing on what’s best for you.

Always look at value and not just cost. A good advisor can help you be more efficient with your money, reduce your financial risk, lower your tax bill, and generally save and make money in many ways other than “beating the market.” Ask yourself the following:

• What might it cost me if I make the wrong decisions about big things? (Think of Social Security planning, college planning, retirement planning, and portfolio management, to name just some.)

• What are the opportunities that I may not be taking advantage of because I don’t have access to professional advice? Do I even know what they are?
• What’s the value of my time and effort currently spent trying to do all of this myself? In the long run, would being able to rely on professional financial help free up my time to become better at what I enjoy (and profit from) doing?
• How confident am I that I have the vision and perseverance to do everything I need to do by myself? Or do I need a financial coach to provide me with guidance and support along the way?

Though it’s difficult to measure, a good financial advisor should be able to create more value for you than she or he earns in fees. The rest is up to you.