How to find a competent investment advisor?

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By Rick Kahler MSFS CFP®

Rick Kahler MS CFP

Is investing fun? Certainly—for some of us who think number-crunching is more exciting than, say, gardening or watching “Game of Thrones.” Yet, as crucial as investing is for creating financial independence, most people don’t enjoy it.

Fortunately, understanding the investment process in detail isn’t a requirement to successful investing, any more than being a physician is a requirement for good health.

The Research

Research suggests a correlation between good health and investing in one’s health by getting regular physicals. Similarly, research shows people who engage professional money management have a significantly higher chance of investment success than those who do it themselves or rely on financial salespeople for guidance.

Unfortunately, it’s easier to find a competent doctor than a competent investment adviser. You know those with M.D. after their names must have passed stringent education and licensing requirements. Yet almost anyone can put “investment adviser” on a business card.

Few Regulations

Despite the lack of legal requirements, there are many competent investment professionals with wide education and strong skills. You just need to look beyond the designations after their names to find them.

Some things to look for:

  • Education. Look for someone with a Chartered Financial Analyst (CFA) designation or a master’s degree in finance. The CFA designation is the gold standard for an investment professional, often requiring three years of education and four years of experience. As an alternative, look for education in finance or financial planning.
  • Experience. The less formal education an investment adviser has, the more experience I would look for. Someone with 40 years of experience and a solid track record may be a better choice than a new graduate with a master’s degree in finance. Look for a balance of education and experience.
  • Broadly diversified investments, both by asset class and globally. At a minimum, look for an adviser whose average or model portfolio includes a broad array of global stocks of very small to very large companies, a global assortment of high quality and high yield government and corporate bonds, a commodity index fund, and a global fund of real estate investment trusts (REITS). More sophisticated advisers may include a small percentage of the portfolio in various investment strategies, sometimes called alternative investments, with solid long-term track records.
  • A long-term track record that equals or exceeds popular benchmarks. Investing is one of the few professions where earning an “average” return over 20 years puts someone in the top 3% of all managers.
  • Uses low-cost mutual funds. The average equity mutual fund charges 1.35% annually. An equivalent index fund can charge as low as 0.10%. When it comes to investing, low fees are usually the best move.
  • Communication. Look for someone who doesn’t talk down to you, but who can make complex strategies easy to understand. Also, ask to see sample investment reports to be sure they are understandable and easy to follow.
  • Tailors portfolios to you. The best constructed portfolio in the world is no good if you panic in a downturn and instruct the adviser to sell out. It’s critical to find an investment adviser who will take time to understand your needs and your emotional tolerance for risk.
  • A fiduciary relationship to you. It’s essential to choose a financial adviser who represents you, with no conflict of interest from sales or commissions. The safest pick is someone who is compensated only by fees for their advice and services.





When you find a professional investment adviser who meets these qualifications, you have one thing left to do. Your biggest challenge may be to let go of any fears or need to control and trust the adviser to work for you. 


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One Response

  1. CFAs Bullish on President Trump

    Like the wider population of financial advisors, the majority of Chartered Financial Analysts (51 percent) believe the election of Donald Trump will positively impact business at investment management firms; only 13 percent expect a negative impact, according to a new survey by the CFA Institute.

    Nearly half (49 percent) expect the result to have a positive or very positive impact on client portfolios on a one-year basis, with 19 percent anticipating a negative impact.

    CFA certificants are more bullish on the bond market, with 85 percent anticipating a moderate or sharp rise in bond yields; 62 percent expect a moderate or sharp boost in U.S. equities. Financial, energy and industrial stocks will fare the best, with the majority of respondents expecting a positive impact, while utilities, real estate and information technology could be negatively impacted.

    Fifty-three percent say they don’t plan to restructure portfolios in light of the results.



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