Most people judge their advisor the way they judge the weather. Good year, good advisor. Bad year, bad advisor.
That is grading someone on the one thing they do not control. Here are five things they do control. Answer each with a plain yes or no.
1. Do I have a written plan?
Not a portfolio. A plan. A document that says where you are, where you want to go, what to do first, and by when.
If all you have ever received is a list of investments and a pie chart, you have investment management. That is a narrower service, and it is often sold at a full planning price.
If you have never seen a real plan, I published a complete sample for a made-up family so you know what to ask for.
2. Can they tell me my cost in dollars?
Ask: “What did I pay last year, all in, in dollars?” That means their fee plus the expenses inside the funds they chose.
A yes here means you got a number, quickly, without a speech. Hesitation, percentages only, or “it is all in your statements” counts as a no.
3. Does my portfolio keep up with a plain version of itself?
Ask what mix of stocks and bonds you hold. Then ask how a simple index version of that same mix did over the last three to five years. After fees, yours should be close.
Close is a yes. If you are far behind year after year, with no clear reason, that is a no. One bad year alone is not. I wrote more on this in what to check when your advisor is losing money.
4. Do they show up when it is hard?
Think back to the last ugly stretch in the market. Did they call you, or did you have to chase them?
Also think about ordinary weeks. When you send a question, do you get an answer in a day or two?
The value of an advisor is concentrated in a few bad weeks each decade. If they were silent in those weeks, the answer is no.
5. Are they straight with me about conflicts and mistakes?
Two parts.
Do you know how they get paid, including on any product they have recommended? You can check the firm’s own disclosure of its conflicts in a few minutes with the steps here.
And have they ever told you about something they got wrong? Every advisor has made mistakes. The ones worth keeping say so and tell you what they changed. That is the whole idea behind The Honest Ledger.
Count your yes answers
Five. You are in good hands. Stop second-guessing and get on with your life.
Three or four. Worth one honest conversation. Tell them which answers were no. A good advisor will thank you for it.
Two or fewer. You are paying for something you are not getting. That does not always mean leave tomorrow. It does mean stop assuming.
Do not grade an advisor on the market. Grade them on the plan, the cost, the contact and the truth.
I run the same kind of test on my own firm and publish the result, including where I fall short. It is on the Besa page.
Related questions: what to ask at your annual review, financial advisor red flags, whether to leave your advisor and do financial advisors actually help.
One question for this week: which of the five could you not answer at all? Start there.
As always, if you want to talk any of this through, the door is open. Genti