What a great question.
It came from a CPA a few years ago over a glass of wine and a few hors d'oeuvres. I didn't give him the answer I think he was expecting.
Some financial advisors/brokers are simply financial salespeople. Within a few minutes of meeting you, they lead with financial products and are trying to make a sale. It's not really about serving you; it's about them making money for themselves.
My answer: "I'm not sure".
I continued: "Before I would introduce products for a prospective client to consider, I would need to get to know them.
If someone had $5 million today, in 2007 they probably had $7-8 million*. If that kind of loss hit them again, their life would probably change. They might have to work longer than they planned. Or they would have to change their lifestyle.
Don't get me wrong. I have a clear investing plan to discuss with your client. But I would need to get to know them first. I would need to understand how they came to have their money. Who is the money for? What will the money provide? When is the money needed? Where will the money be used? How can you appropriately invest money for an individual until you get to know them?"
His response: "That's a good answer". It was an interesting conversation with a sharp CPA.
Other questions investors should ask a potential advisor: How will you invest when the markets go down? How often will I hear from you? How are you different from the rest?
If you're looking for a financial salesman, there are plenty for you to pick from. But, if you would like comprehensive financial guidance from an experienced advisor, I encourage you to get in touch with me.
Our mission is simple: "HELPING PEOPLE PURSUE THEIR PASSIONS AND DREAMS".
*This conversation took place in March 2010 . The pain of the downturn was still very clear in people's minds. In 2008, the S&P500 went down -38%. Many people lost 35-50% of their portfolios. Therefore a $7-8 million portfolio in 2007, losing about 35% in 2008, would have ended up as a $5 million portfolio.