Finding The Right Financial Advisor

I recently re-read a few chapters of a good introductory book on investing called “The Art of Investing & Portfolio Management.”  I think one of the best chapters for individual investors to read is the chapter on what to look for when selecting a financial advisor.  Here are the bullet points (I’ve given you some expanded excerpts on the first two as I feel these are of critical importance):

1)      The Advisor Is a Registered Investment Advisor (RIA)

“We strongly encourage you to work only with professionals who… are RIA’s.  The reason: RIA’s have a legal fiduciary responsibility to provide their clients with the highest possible standard of care.  As a fiduciary, an RIA is required by law to always look out for your best interests and to completely and objectively disclose all important information in his or her dealings with you.  By contrast, a stockbroker is not legally required to always work in your best interest.”

2)      The Advisor Uses a Fee-Based Compensation Structure

“You’ll pay a fee-based advisor a percentage of your portfolio’s assets each year, as opposed to a commission on each transaction.  As a result, a fee-based advisor’s interests are aligned with you own: The advisor does well only if your portfolio does well.”

3)      The Advisor Is Consultative

4)      The Advisor Incorporates Superior Capabilities at All Stages of the Process

5)      The Advisor Is Someone with Whom You Feel Comfortable Working

Note: I am an Investment Advisor Representative (IAR) of KMSFinancial Services, Inc., a federally Registered Investment Advisor(RIA).