May You Live in Interesting Times
We live in a world that we could have never imagined a decade ago.
We are more “connected” today than ever, yet many of us are feeling more alone than ever.
We have access to more information today than we ever have, yet many of us are feeling even more uniformed.
The headlines are littered with polarizing opinions on everything from the pandemic to politics. And now add to this, a highly publicized stock market battle, in which a group of message-board-rebels are using the stocks of struggling companies as financial weaponry against a handful of hedge fund titans. All the while, sideline spectators (speculators) are jumping in the frenzy, hoping to get-rich-quick.
All of this is unsettling, to say the least.
An Appetite for Assistance
More than ever, people want advice. People want guidance. BUT they don’t know whom to trust.
In July 2019, I wrote The Right Way to Shop for a Financial Advisor, and I followed this up in May 2020 with The Right Way to Shop for a Financial Advisor – Episode Two. In these two discussions, I provided what I believe to be 10 very practical and unique questions an investor should ask a potential advisor.
Today I’d like to provide a postscript to further assist all those out there “shopping” right now.
Why I’m Writing This…
Most of the things I write are inspired by interactions in my day to day life as an advisor. Lately, I’ve seen a big spike in inbound inquiries and people wanting to learn more about our advisory practice. This interest is both flattering and affirming – we must be doing something right. I also know that much of this is driven by the uncertainty that is currently looming.
Being driven by this uncertainty or an unsettled feeling is a perfectly valid and healthy reason to kick the tires and do your due diligence.
One Must Trust
BUT these 10 questions I provided won’t be enough. A healthy client-advisor relationship will depend on trust.
And herein lies the dilemma – how does one establish trust in one or two or even three “interview” meetings? They don’t. Trust takes time to build, and that is why the key is to shop for trustworthiness.
First things first, what is trust? Trust is being able to leave your prized possession (e.g., your life savings) under the care of someone else and having confidence that they will watch over it with the same care that you would. Actually, to care for it even better than you would or could!
Now… let’s discuss how you decide who is trustworthy.
The Behavioral Interview
In a past life, I was a manager. This means I not only had to manage the day-to-day operations of the business and train and develop the staff, but I also had to hire and interview candidates. In the beginning, I knew nothing about how to interview prospective employees.
Luckily, someone was there to teach me. The process I learned was based on asking behavioral questions. These are questions that ask a candidate to provide an example from their past that would portray the character attribute that you [the interviewer] are looking for in an employee.
So, if you were looking for someone with high integrity, you might ask a question like, “Tell me about a time that you had the opportunity to take a shortcut that might be deemed unethical.” You’d follow up with questions like, “How’d you go about deciding what to do?” or “Is there an example of a time that you did take a shortcut? What’d you learn from that situation?” As an interviewer, you’d continue to pull on that thread until you felt satisfied that this candidate’s example from their past was a fair representation of the character attribute you are looking for.
Behavioral interviews lean on the concept that past behavior is the best predictor of future behavior. Direct inquiries, like “Do you have integrity?” are not very revealing or helpful.
Crafting Questions, The Lure of Salesmen, & Leaning into Intuition
So, what character attributes are important to you in an advisor? What are the qualities of a person you’d trust? Each person’s list will be unique. Maybe things like integrity, honesty, accountability, and humility might be a few. If so, these would be the attributes you’d start modeling questions based on.
Let’s give it a try…
If I wanted to understand if my potential advisor candidate is honest, I might ask, “Tell me about a time you didn’t share the whole truth with a client… a time when you knew you weren’t being 100% honest.” I’d also want to know, “How’d you make it right? What’d you learn from that experience?”
Now, you might be thinking that this is overkill, but let me reassure you it is not. You are asking this individual to care for your life savings, and you need to make sure they are a good fit. As the adage goes, measure twice and cut once. Switching advisors multiple times is a laborious process and not conducive to crafting and maintaining a successful financial plan.
Here’s the tricky part, it’s really easy to mistake salesmanship for trustworthiness. Charm and likeability are not inherently bad, they are great qualities, but they can be distracting for a shopper. Again, the vetting process is in place to sniff out those key character traits important to you. So, to some extent, you will need to use your intuition.
Your intuition is an internal radar that usually sounds an alarm when things seem out of place, or you’re feeling uncomfortable with a situation. And if you are still unsure, seek out counsel from someone you trust. My wife has a powerful intuition, and when I’m undecided on something, I’ll usually look to her for her sense of the situation.
You Don’t Need to be a Finance Expert
For some people, interviewing an advisor can be stressful because they feel like they need to be a finance expert. So, they invest in some light prep work and internet reading before the initial meeting. A few Google searches will lead them to articles on current events and media outlets touting different high-flying stocks’ performance. The natural sequence from here is asking the advisor questions about these current events and other performance-comparative questions. I am not here to tell you not to ask these questions, but I am telling you that these are not the most relevant/impactful questions to ask.
You don’t need to be a finance expert. You’ve spent your whole life deciding who to trust and who not to trust. You’ve been burned in the past, but you also have some faithful folks that have come through for you. You need to be a people expert. That’s my advice – slow down and be intentional about finding a trustworthy advisor.
As I’m sure you’ve gathered, this advice runs deeper than just shopping for an advisor. Whether it’s a new friendship, a potential new hire for your business, or any professional you are seeking out, much of the relationship’s success will depend on a deep and solid trust.