There are very few 'good' financial advisors. Just look at the track record: When markets are bullish any old advice works, and advisors have clients who prosper. They adhere to the old Prudent Man stuff: Buy and hold, diversify etc.

The past decade has demonstrated that advisors know less than the customers whose money they take. Bear markets are when advisors can show what they are worth, and the technology bubble and the 2008 massacre demonstrate that these guys/gals aren't up to the task.

Any reader who can self direct his/her own investment portfolio can learn to protect assets without paying anyone for advice. They can learn to use collars: http://tinyurl.com/m5d4a3

Those who cannot do it themselves are almost forced to hire help. But if the markets don't rally, those advisors aren't going to do anyone any good. And the wish of finding some genius of an advisor is not going to be granted.

There are rules against advertising for financial advisors. They are limited by compliance regulations in many respects...even when utilizing social media. Independent Advisors have a bit more freedom than registered reps at wirehouse firms, but mostly financial advisors have to rely on word of mouth referrals. In addition, clients don't always willingly refer even when asked, and even if the advisor has done a good job. I believe this is because money is a personal subject and not always openly discussed, and there is that underlying burden of responsibility if something goes wrong.

What makes a "good" financial advisor? Beating the market? The truth is most clients with assets care more about minimizing the ups and downs and protecting their capital versus outpacing the S&P. At least that's what I found in my 14 years in the business. A 'good' advisor will keep his/her clients invested and help remove the emotion from the process. In theory index funds are the best way to get performance (as stated, managers can rarely outperform), but in practice, it is very difficult for investors to stick to the strategy and not get sucked in by the powers of greed and fear, which ultimately lead to poor investment decisions.

I don't buy the argument that compliance regulations won't allow you to advertise. I want to see the rule, where is it? Compliance won't allow you to make certain promises or even statements, but where is it written you can't say, here I am. This what I do.

Compliance won't allow financial advisors to use any subjective terms in ads, like "good", "great", "responsive", "trustworthy" - nothing. Compliance won't allow client testimonials. Ads have to be very matter-of-fact and would not appear very compelling to anyone reading them. It would be impossible for an advisor to set themselves apart form the crowd through one of these ads.

Well, I'm no expert in advertising. I stay as far away from it as possible. And I don't have any factual basis for saying what works and what doesn't. But people don't even know who is out there.

People don't want to entrust their life savings to an advisor they know nothing about; and it's not advisable to pick an advisor based soley on an ad. This is a relationship business; and to effectively deliver the appropriate advice, the advisor needs to get to know the potential client, earn their trust, have transparency in all their operations, give objective advice and not base investment choices on options that will earn them the highest payouts/commissions. Many custodians, like Schwab, TD Ameritrade, etc. can refer you to advisors in their programs, but asking trusted friends is the best bet. Referrals from satisfied clients, especially given the market we've been through, is your best resource.

This is a good conversation. fabeetle should help this in the future. By creating a platform where clients can rate, review, & research financial advisors, the companies they work for, and the products and services they offer everyone will have a more transparent experience. The key is that our application is client driven which provides some relief to the strict compliance standards. Also we are aggregating tweets from financial advisors why we are in development at http://tweet.fabeele.com.

I have been in practice for 37yrs and the issue only gets worse- as anyone can use the label financial advisor-- advertising is now in many different listings in the yellow pages-- an Atty only has one label - and specialization - a CPA is the same - but Financial advisor in the yellow pages goes by many labels--- We are a fee based advisory firm that will insist that a client has a fee based written plan - defining thier goals , vision, mission and values before any solutions are presented. Once accomplished and solutions are weighed based on pros and cons and what fits, then implementation can occur. We can assist in the implementation as Investment advisor or place various insurance contracts and act as the broker in these transactions, but work with the other advisors in implementing Legal or Tax issues as part of the initial fee. How would you list this?

http://www.fpaforfinancialplanning.org/FindaPlanner/ChoosingaPlanner/ is the web address that the Financial Planning Association offers to those searching for advice. They say "Choosing a financial planner is as important as choosing a doctor or lawyer; it's a very personal relationship. In addition to competency, a financial planner should have integrity, trust and a commitment to ethical behavior and high professional standards. You want a planner who puts your needs and interests first.

Many planners specialize in working with certain types of clients, such as small-business owners, executives or retirees. Many have minimum income and asset requirements. Some specialize in certain areas of planning such as retirement, divorce or asset management. This is why we recommend that you interview at least three planners in person to find the right one to serve your needs.

Personally, I agree with your thought and other posted comments that true "professionals" don't advertise because it is unseemly. Other professionals also don't offer a free meal as a way to obtain clients.

Good point Irwin. The very definition of Financial Advisor causes confusion in the public as anyone can call themselves an Advisor! Whether you focus on insurance, mutual funds, or the whole picture, you can label yourself as an advisor.
One way that advisors try to connect with people is by joining a trade organization such as the Financial Planning Association (FPA). Usually, the mission of these groups is to promote comprehensive financial planning to the public.
Most importantly, the public should know that most Financial Advisors will meet with them for FREE to determine if there is a potential for a mutually beneficial relationship. The public should take advantage of this offer to address any concerns and find out what the Financial Advisor is actually offering them.

I am a young financial advisor. I have found that advertising is extremely expensive due to all of the regulations. Yes, you can advertise, but you have to use all of your compliance disclosures which means that you can not advertise in a "business card" sized ad - leaving us out of many local publications like city/town magazines and church newsletters where other professionals (doctors, lawyers, dentists) seem to advertise. I agree that since we don't have a lot of consistency in our professional name, it is also difficult to advertise in things like phone books. I am hoping that eventually word of mouth, referrals and networking will work for me.

There are plenty of good financial advisors, but as someone else noted, our role is to take the emotion out of investing and our job is not to beat the market. If you are going to look constantly for the person who has the highest returns, then you are more likely to find someone who is unethical. It is impossible to beat the market all the time.

I concur with the comment that financial advice is a relationship based profession. I can't imagine advertising in the traditional way. That's not to say I don't use social media to get myself known to a larger audience, but all of my business ultimately comes through referrals. The best way to find a good advisor? Start with your family, friends, colleagues, and professionals like lawyers and accountants.

If the author of this article wonders why, then I am sure others wonder the same thing. So it's a good topic.

I would chime in to say that the wirehouse that I work for says "Advertising in large national print/broadcast outlets by the local branch level is prohibited". As far as advertising locally, we not allowed to are use "customized" ads because the firm wants to ensure "consitant company branding". In addition, we aren't allowed to advertise in any "online publication" (non company websites, etc), it can only be print media. For the advertising that we can do, there are many compliance hoops we have to go through and then tack on the cost of doing it - it doesnt often make sense. On top of that, this is a relationship business and we don't want to have clients come to us because our account performance was good and I am bragging about it in the press. One things cool off, those assets are leaving out the door. Referrals are the way many of us build our long lasting relationships.

The sites mentioned above are good sources, or you can just google something like "pick financial advisor" and you will see there is plenty of help available.

Yes, it is very difficult for people to choose a financial advisor. This is why firms like ClaroConnect - http://www.claroconnect.com - have started to match people to financial advisors. The website is built like a dating website, so you can screen through advisors by things like qualifications and fees, then read detailed profiles of the advisors, and then you decide which ones to contact to speak in person.

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I really appreciate your post. It gives an outstanding idea that is very helpful for all the people on the web. Thanks for sharing this information and I’ll love to read your next post too.
Regards:
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