My ex business partner used to say “Do not take financial advice from anyone who makes less money than you do”. This is sage advice. In my mind, it is even better for those that actually follow that advice. However, it is difficult, if not impossible, to assess or speculate on the income or net worth of your financial advisor unless you know them well and personally. They may be groomed to perfection, be clear and articulate in their communication accompanied with the appropriate academic credentials and drive a new high-end vehicle. They may travel extensively and associate with others that seem to have a reputable and affluent lifestyle. But if they are salaried employees that work directly for a bank or insurance company, they may not be making any more money than you, their client does. Does it matter that you may be taking advice from someone who actually earns less than you do? Can they even relate to your needs? So how do you determine who is going to provide you with financial advice and expertise? What signs of “success” do you look for if any at all?
Some clients may say that they work with an independent advisor who seems to be living the lifestyle that the client is wanting for themselves. This may give a client an indication of how well the advisor is doing but how do you really know for sure? Maybe everything the advisor has is leased or rented, their car, their clothes, their home and their lifestyle. I guess that if they have all these things in their possession, they can at least make the payments. How do you know that this individual is honest and has integrity?
I think it is necessary to work with an advisor that has a net worth that is larger than the net worth that we want to accumulate for ourselves. If you yourself work at an institution, it will most likely be easy for you to feel comfortable with another individual that displays similarities in education and lifestyle. For example, I would suggest that most teachers would find it easy to deal with a bank or insurance company employee. If you have lofty retirement dreams based upon a successful entrepreneur’s lifestyle, you will most likely seek out an advisor that mirrors your ambitions and look for a successful independent consultant.
In either case, their outward appearance and material signs of success are never any guarantee of the individual’s ability to guide you well in your financial planning efforts. Do a little more research in your due diligence, be comfortable with how long an individual has been employed by the institution and/or seek personal introductions from family members or other business associates until you are comfortable with your advisor’s background and representations. And never ever judge a book by it’s cover. But you already know not to do that.
Copyright 2013 Richard M. Kiernicki. All rights reserved.
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