You know it when you see it.

When I moved from pure investment management into the wider world of financial advice, I am not sure I knew what I was getting myself into.  What I discovered was that most people desperately need help with their money life and with that I discovered my purpose and my mission.  What I also discovered was that because it’s a part of life that most people have never been educated about, it’s very easy to take advantage of people. 

It makes me mad.

I have seen the same story repeated. People sold products that are not right for them but that pay the advisor a handsome commission.  People sold inappropriate investments by people that know very little about investments themselves (throw in some jargon and they will never know).  People sold expensive products when a cheaper one would be better.  People sold a product only to never hear from the ‘advisor’ again. 

It’s no wonder that people are skeptical about financial advice.  Whilst bad advice can be costly, good advice can change your life.

The question is, how do you know which you are getting? 


Carl Richards talked about this recently on a podcast with a UK based advisor called Justin King.  Carl uses the term ‘real’ financial advisor.  Some might use the term ‘fiduciary’.  A real financial advisor is technically proficient, honest and empathetic.  You would have them help your Mum.  A real financial advisor will look you in the eye and say ‘if this was my money, this is how I would handle it.’  They understand that there is an art and a science to financial advice.

If this was my money this is how I would handle it.

The problem is that you can’t look up “real financial advisor” in google and get an answer.  And as Carl says, “you can’t design a checklist and have honest fall out of the bottom”.

The US Supreme Court was once asked to define pornography and they said ‘we don’t know how to define it but we know it when we see it.’

I agree with Carl, that’s how it is with financial advice.

If you walk into an advisor’s office and have the experience that most people have it will go like this.  You’ll be asked to give an overview of your current position and then you will be sold something.

Carl describes the experience with a real financial advisor.  He says, “you’ll know the difference when you are almost confused because someone is asking you questions and listening.  And you can ask them questions like ‘how are you compensated?’ and they don’t wince at the question – they welcome the question and they want to talk about potential conflicts.  And you feel like you can ask any question and get a straight answer.  And they are listening to you.  You walk away thinking ‘that person understands me’.”

Justin goes on to say that after a meeting with a real financial advisor you will find that you have been taken a bit further forward in your thinking than you have ever been yourself.  You will have been shown a way to think about your money in a different light.  That’s how you can make smarter decisions around your money.

BUT (there is always a BUT), Carl warns that “everything we have just described, the greatest conmen know how to do too.”  Conmen know how to listen to you and make you feel good. 

There is one more layer on top of technical proficiency and the ability to ask great questions.  And that is absolute transparency.  You must know what you are paying, how the advisor is charging (those two things ought to be the same) and where your money is (it must be segregated away from the advisor).  You should be in total control of your money. 

Your money is important.  It’s not as important as your health or your family or love, but it is important.  You have worked hard for it.  You are the steward of your own money.  Your advisor should be your trusted partner.  Choose that partner wisely.  Do your research and ask questions. And remember, ‘you will know it when you see it.’