The Stock Market Winds

Selecting An Investment Advisor

How To Select a Financial Advisor

Finding a financial advisor can be daunting. This is because the title “financial advisor” is not regulated, and advisors range the gamut from annuity sales people to insurance agents to registered money managers.

The following report will explain what to look for in a financial advisor and how to quickly identify one who is competent and offers you the best service for your money (not to mention the best return/risk ratio)..

Who you select to be your financial advisor is largely dependant upon your goals, financial situation, state of life and investment style. If you are just looking to buy insurance, there is certainly no problem buying from an insurance agent. But, if you are interested in investing your 401k or other funds for long-term growth, it is crucial that you understand how to select the top money managers that will help you grow your investment portfolio over time.

Making the Right Decision for You

The first step to making an educated decision is to understand the difference between various professionals in the financial field. Two titles that often get confused are financial planners and wealth managers.

Financial Planners vs. Wealth Managers

Financial Planners. This term is used very loosely, and almost anyone can call themselves a financial planner. They usually gather your information and then try to sell you products, because their pay is based on commissions. If you chose to work with a financial planner, it makes more sense to talk to a Certified Financial Planner (CFP), because they typically have more training and experience.

Wealth Managers. Advisors who are wealth managers usually have more training, and in some cases, they actually manage assets, in separate accounts or a hedge fund. Wealth managers make investment decisions, build portfolios and create investment strategies. If you need to meet with a wealth manager, it’s best to talk with someone who holds a professional credential such as the Chartered Financial Analyst (CFA) designation, because they have more training and expertise.

Ask These 7 Questions Before You Select a Financial Advisor

To make sure you don’t get stuck with a salesperson when you are really looking for someone to manage your money. Make sure you download your free copy of “The Top 7 Questions You Should Ask”


Fiduciary advisors make up less than 15% of the financial industry. Cerulli Associates, a Boston firm that studies the financial industry, recently determined approximately 250,000 people throughout the U.S. call themselves financial advisors. Of those, 232,000 are sales people who work for their firm, not you. Only 23,000 are registered investment advisors (also known as fiduciary advisors).

Fiduciary advisors have a legal obligation to put your interests ahead of their own. This means if your advisor does not act in your best interest, you have the right to take legal action. Sales reps selling insurance, mutual funds or other financial products are most likely not fiduciaries. Registered Investment Advisors and Investment Advisor Representatives are fiduciary

Look for financial advisors or money managers that have at least 10 years of experience. Markets change constantly and are notoriously difficult to navigate. Ideally, your financial advisor should have experience investing in both good and bad markets. In the final analysis, you are paying an advisor for their experience.

Paragon can offer you a proven record of success working in all types of market conditions. Since we opened our doors in 1986, we have continually improved our investment methods and client services. When you invest with us, you receive all the benefits and advantages of that experience.

Legitimate advisors will be able to produce a clear report that shows exactly what they’ve done for their clients over the years. Showing you their track record of a mutual fund, a hypothetical model, or anything else they have recently started selling does not count. They need to show you their own track record, which is a composite of the results of their previous clients’ investments. Any advisor who refuses to show you at least a five-year track record of their performance should be crossed off your list.

Most fiduciary advisors are not active money managers, and therefore have relatively conservative returns. There is a small handful of money managers who consistently perform better than the S&P 500.
Find a money manager who actively manages your funds. Make sure their portfolios have a long history of solid performance, and identify the risk levels involved.
Paragon’s portfolios have consistently achieved above average performance in both good and bad markets. This is due to our active money management approach and sound investment strategies. We use propriety quantitative models to measure, monitor, adjust and change your investments as market conditions change. Our portfolios are driven by quantitative models and have a strong history of outstanding risk adjusted returns.

Visit our website,, to see our performance. It is updated each month. Go to Investment Services/ Portfolio Performance.

Many commission-based salespeople are honest individuals. However, in the financial services industry, the worse the product, the higher the commission. The easiestwaytoavoidthose“badproducts”andeliminatepotentialconflictsofinterest is to avoid salespeople who receive commissions. By working only with advisors who are paid through management fees and not commissions, you can make sure their interests are aligned with yours.

If there is a surrender charge, there is almost certainly a commission. If there is a commission, you are not dealing with a fiduciary advisor. You should be free to move your money out of an investment if you are dissatisfied. This means you should never own a product with a surrender charge.

In light of current white collar scandals, many people are nervous about investing their money with a small private firm. Although most financial advisors are honest, it is always best to ensure your funds are protected. At Paragon, our funds are custodied at Charles Schwab – this allows our clients to have direct access to their money and enjoy the benefits of being insured and protected by a very large organization.

Good financial advisors will work with you to determine your risk tolerance. This can depend on many factors, such as how close you are to retirement, your goals, or your lifestyle needs.
If your risk tolerance is set too low, you won’t generate the returns you should. If it is set too high, should market conditions become difficult, you will feel pressure to sell your investments, which could cause you to miss out on superior long-term returns.
We help our clients determine their risk level through a simple Risk Tolerance Questionnaire. We then design a portfolio that is customized to their risk tolerance level. Look for an advisor that is aware of different investment styles and offers you options.

Your financial advisor should assist you in determining your tolerance levels and you should always feel comfortable with where your funds are invested.

1. How do you charge for your services, and how much?

If you didn’t see this information on the planner’s web site, ask whether there’s an initial planning fee, whether they charge a percentage for assets under management, or whether they make money from selling you a specific product. Not only should you know how much the service will cost you, but it can help you determine whether they have an incentive to sell you things.

What licenses, credentials or other certifications do you have?

Of the four main types of financial advisors, the certified financial planner (CFP) designation is harder to achieve than Chartered Financial Consultant (ChFC), because the former requires a comprehensive board exam; the latter, however uses the same core curriculum. If you want someone to manage your money, then look for a registered investment advisor (RIA). If you have a high income or a small business owner, you’ll probably want a certified public account (CPA), who can offer you advance tax planning. The personal financial specialist (PSF) certification is usually obtained by CPAs who want to demonstrate they can help clients with comprehensive financial planning.

What services do you/does your firm provide?

Implicit in this question is also what assistance the advisor will not give you. “Some people are just investment advisors and only provide you advice on your investments,” says Bera. “Other people do comprehensive financial planning around retirement, insurance, estate planning and tax planning.” Go with someone whose offerings suit your needs.

What types of clients do you specialize in?

Some financial advisors have a niche, says Bera, and if you have a specific interest — such as charitable giving or socially responsible investments or if you’re a newlywed or recently divorced — you’ll want to find one that concentrates in that area too.

Edward A. Wacks, a CPA and CFP affiliated with Ameriprise Financial AMP +0.56%, says, “Most advisors tend to focus on people within 10 years of their age.” He for instance, focuses on soon-to-be retirees because he’s 61, and business owners because he has his own business. “I feel we have some commonality, and I understand their issues,” he says.

Could I see a sample financial plan?

There is no one set structure for a financial plan, which means there is wide variation. “Some people might give you 50 pages of stuff you don’t understand like charts and graphs, and another planner might provide a five-page snapshot of your financial situation,” says Bera. “With a sample, you can say, ‘I really want that in-depth analysis,’ or ‘I don’t understand that.’”

What is your investment approach?

If you have a strong preference for a particular philosophy, ask the advisor what his or hers is. For instance, if you prefer to use low-cost funds, you can ask whether they plan to used actively managed funds or passive investments. Wacks gives an example of the kinds of differences in investment philosophy that can arise: “I say to the client, ‘I’m not here to make you a lot of money. If you want someone to do that, and trade stocks back and forth, then I’m not the person. If you’re looking for someone who makes investments consistent with your risk tolerance and goals, then I can help you.’”

How much contact do you have with your clients?

“Some of planners hold an initial planning meeting and then you see them once a year, and that’s all you get,” says Bera. Others might have quarterly check-ins. “Some clients just want to go over everything once a year and then they’re good. Others are looking for more support, so it depends on the amount you want to pay, and how involved you want your planner to be. Are you a delegator? Or do you expect your advisor to explain things to you?” If you’re not sure of what you’ll be comfortable with, the J.D. Power & Associates survey found that investors contacted 12 or more times a year had the highest rates of satisfaction with their advisors.

Will I be working only with you or with a team?

This question will also help you see how often you’ll be in touch with your advisor. “Some will say, ‘I’ll meet with you once a year, but Gina will reach out to you regularly and is my right hand person and does a lot of data gathering for me.’ Some companies have a team approach rather than an individual approach,” says Bera, adding that one isn’t better than the other. “It’s really whatever your preference is. But I wouldn’t want someone to get into a relationship and say, ‘I only see my advisor once a year, and I thought I’d be seeing him more often.’ Then others really like the team approach because they know if their planner is on vacation, they can still get an answer right away.”

What makes your client experience unique?

“Basically, ‘Why do I want to work with you?’” says Bera. “And people should be able to answer that.” This will also give you insight into whether their strengths are the ones you seek in a planner. For instance, she would tell clients, “I’m your financially savvy best friend,” and explain that her focus is on using their money to match their values. This pitch would appeal to some clients, but not ones who, for instance, are out to maximize returns in the market.
Finally, there’s one last question you want to ask of yourself after meeting with a potential planner:

Did he or she ask me questions and seem to be interested in me?

“Does he or she talk 90% of the time?” says Wacks. “If it’s more like 60/40 and he has asked you how he or she can help you, that’s really important. Financial planning about looking at the person’s individual circumstance instead of punching in some numbers — it’s based on the client’s goals, financial background, what they believe about money, etc.”