The Market's Getting Scary: Has Your Financial Adviser Called You Yet?

Financial Advisor
Alamy

When stock and bond markets start to buck and plunge -- like they're doing now -- many investors get nervous about their investment strategies, and look for a little professional hand-holding. After all, one of the main reasons to pay a pro for financial advice is to get the customer service you need to ride out challenging markets without losing sight of your long-term objectives.

In dealing with a financial adviser, though, the question inevitably arises: How much personal contact should you expect? Unfortunately, the answer often depends more on the way your adviser is compensated than on your real needs.

How You Pay for Your Adviser's Phone Calls

On the one hand, those who work with stockbrokers and others who get paid on commission should expect to hear from their advisers fairly regularly. But often, those calls are merely to solicit buy and sell recommendations for their investment portfolios rather than to talk about bigger-picture financial issues. Unsurprisingly, if brokers only get paid when clients buy or sell, then their employers typically pressure them to boost their commissions.

On the other hand, fee-based financial advisers often have the opposite incentive. These advisers often get paid a percentage of the total assets they manage for you. The optimal arrangement for them, therefore, is to give you just enough personal attention to keep you as a client, and spend as little effort as possible to get that fixed fee.

Overall, regardless of the ways they're paying for it, clients frequently don't feel that they're getting the advice they need.

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Even among ultra-wealthy clients, a recent poll from investment-services provider SEI found that although 39 percent of those surveyed are most confident working with a wealth adviser to help handle tough financial questions, 57 percent believe their wealth advisers aren't giving them all the information they need in order to assess their investment risks. As Michael Farrell, managing director of SEI Private Wealth Management, noted, the solution "comes down to having frequent and meaningful communication with clients in order to arm them with all the information and advice they require to make confident decisions."

If even the ultra-rich aren't getting the level of service they want, imagine how much harder it must be for those with more modest assets -- and less income potential for the advisers who serve them -- to get the attention of their financial professionals.

How Often Is Often Enough?

Obviously, different clients need different things from their financial advisers. Some will want frequent feedback, while others will be content to establish a plan and stick with it. You might want high levels of contact early on as you establish an investment plan, and then be willing to accept less contact as changes become less necessary and frequent.

But there are some objective minimum standards that you can fairly expect good financial advisers should meet.

For instance, the standards that govern the Chartered Financial Analyst designation for investment professionals state that clients should have their baseline investment policy statements reviewed and updated at least annually, as well as when major changes take place in their lives. For instance, after an event like a marriage or a birth of a child, revisiting your financial situation is beneficial.

Perhaps most importantly, advisers should tell you at the beginning of your working relationship how much interaction you'll have and in what form. Setting expectations helps you hold your adviser accountable; if an adviser doesn't deliver the promised level of service, then you'll know it's time to look elsewhere.

Get the Service You Need

Financial advisers will earn thousands of dollars over the course of your lifetime to provide you with the services they offer. It's your right to claim every penny's worth, and the key to a successful adviser relationship is finding an investment pro who'll your goals the top priority.

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