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How Does Your Adviser Perform

This past weekend, I read a piece based on the assertion that financial advisers do not tell their clients about how the adviser’s investment selections perform over time. The author felt that the answer to that question was essential and expressed wonderment at the failure of financial adviser clients to ask their advisers how the investments they selected had performed.

The clear implication of the piece is that the work of a financial adviser is all about advising where clients should put their money and, further, how well those recommendations worked vis-à-vis other recommendations and investments. However, for many financial advisers – and their clients – the sought after financial advice is not about investment performance but is about the client and the client’s personal goals. Typically, a person in the financial industry who focuses on providing advice on investment selection and prides his or her performance is called a broker and not a financial adviser.

If a client’s first question of an adviser relates to the adviser’s stock picking ability and how the client can make the most money in the market, that client is missing the point of comprehensive wealth planning and lifetime advice. Not only is it impossible for a financial adviser – or broker – to guarantee good, let alone great performance, but even if you have it over some period of time, what are you planning to do with it?

Financial advice that centers on what a client wants to achieve with their money during their lifetime and perhaps beyond is much more useful than advice that simply attempts to outperform a benchmark or market average. Trying to outperform often means a client is taking on more risk than is necessary to achieve meaningful goals, thus jeopardizing those goals. 

So the first question a client should ask a potential adviser is about what the adviser can do for the client. If the adviser’s answer is to make more money for the client, look for another adviser or ask for unbiased information about that adviser’s investment track record. If the adviser’s answer is to help you – the client – to understand and achieve your valued financial goals, stick with him or her. 

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