Is it Time for an Advisor?

time for advisor

Three questions to help you find the right fit.

Summer months are over and market volatility is back in style.  If you hadn’t checked your portfolio in the recent past, chances are good that you have now.  And like many others, you may be asking yourself, “is it finally time that I need an advisor?”

Finding an investment advisor is difficult. Trusting your portfolio to an advisor is both a financial decision and an emotional commitment. However, finding the right advisor can have a meaningful impact on your future.

Here are three things to keep in mind when thinking about any relationship with an advisor.

  1. What value do they promise?We’ve all read studies claiming that very few professional investors can beat the market consistently. This is largely true.  But “beating the market” by selecting the best investments is just a small portion of what advisors attempt to do.  A good advisor can get between you and an impulsive decision.  Having an objective voice, one that is unbiased by emotion, can help put the daily ticks of the market in proper perspective to your long term goal.

    Putting your money in good investments doesn’t guarantee that you will keep it there.  A good advisor will outline the best plan to align your values, financial goals, and capital.  With this understanding – likely reiterated regularly in conversation – you become far more likely to stay the course, especially when markets become most challenging.

    The difference in your returns if you stay invested according to your plan, as opposed to abandoning it, won’t show up on your quarterly statement.  But its impact on wealth creation is very real.

  2. Are they listening or making an offer? We all know what an offer looks like.  It’s someone in conversation with you while keeping one hand behind their back.  As you speak, they smile and nod. Then at the conversation’s first lull, the hand comes out – that’s the offer.  It may be a great offer.  It surely has a great story.  But is this offer the right answer for you?

    A quick offer is all too common in investor experiences.  But a good relationship depends on an advisor learning about you and your goals.  In fact, during the initial conversation, you should be the one doing most of the talking.  You need advice that fits your financial situation, make sure your advisor is listening to get a good understanding of what that is.

  3. How are they compensated? Currently, there is no uniform standard of care in the financial services industry.  This means that how you receive financial advice may differ depending on if you visit a bank, insurance agent, broker, or independent advisor.

    How can differing standards impact your relationship with an advisor?  Know the term Fiduciary Standard.  A Fiduciary Standard means that advisors must provide advice that is always 100% in the client’s best interest.  This issue has gained national interest recently as the Department of Labor has proposed a change that will drastically expand the scope of advisors who are required to follow a fiduciary standard. As it stands, however, being a fiduciary is not a requirement that needs to be met in order to call oneself an investment advisor.  Firms registered with the Securities Exchange Commission, or registered as an investment advisor representative with a state regulating agency, are held to applying the fiduciary standard when making investment decisions for their clients.

    There are intelligent and dedicated advisors who don’t follow the Fiduciary Standard, but working with a partner whose interests are aligned with your own can ensure that you aren’t being sold investments that are not in your best interests.

    The key is to ask an advisor to discuss any conflicts of interest. More directly, you might ask if they are a fiduciary, and how they are compensated.  An advisory fee may be a flat fee or a percentage of the portfolio being managed.  Or it could come from commissions or fees on certain products being sold to you.  The more you know about your advisor’s compensation arrangement, the more you will understand their motivations and be able to put their advice in proper context.

    Your advisor should promise you more than advice on stock picking or timing a market.  You want someone that will help you set important goals, recommend a plan, and monitor your steps to achieve it.  Trust-building takes time and effort.  With these three questions in mind – what value is promised, are they listening or making an offer, and how are they compensated – you’ll be more prepared to go forward with your search.


Perritt Capital Management, Inc. is the registered investment advisor for Windgate Wealth Management accounts.

Data here is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

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