In 1999 everybody was much happier than they are today.  At least those who were looking at their investment portfolios were happier back then.  And there was a lot to be happy about.  If you were investing in technology companies you were very happy.  You were probably so happy that you had moved all of your money in your 401(k) accounts into fast growth stocks.  And then you became happier.  

You might even have been so happy as to refinance your mortgage and lower the interest rate on your loan.   Maybe you took out some equity while you were refinancing and put that into the stock market as well.  The way things were going you could see yourself retiring a few years earlier than you had originally planned.  After all, the economy was booming and the federal government was running and even projecting future budget surpluses.  Things were going great and with the promise of a “new economy” based on  improving technology and rising productivity, the future never looked brighter.  

But, not everybody was happy.   A small minority of investors didn’t make any moves.  They just kept chugging along at their own pace, and despite the overwhelming evidence, they never believed that the economy had changed.  Another sector of the unhappy were those who came to think they had missed the boat.  Perhaps you were one of these people. As you watched the market climb to record levels, you couldn’t believe it could go higher.  Then it did just that. But, still you were cautious. 

Happiness bred overconfidence

 The happy investors just ignored this group and continued to dream of bigger houses, early retirement and prosperity.  While all this happiness was spreading, an interesting change was coming over people.  They began thinking that they really didn’t need a personal financial advisor.  They were doing just fine without the advice they had been getting from banks, stockbrokers and investment advisors.  If they wanted advice they just had to buy the latest money management magazine.  There was all the advice they needed and it all could be had for the mere price of the magazine. If they were looking for the top ten stocks to own or the best funds for their portfolio, it was right there.

Besides the magazines, books, and tapes there was also the Internet.  Information was just a mouse click away and often times it was free.  It was easy to trade online, and you could even check on your portfolio while you were at work!  For the more aggressive investors you could even trade like the pros by opening a “day trading” account.  

Everybody was happy and they were getting happier by the day.  

From overconfident to terrified to fairly sane

Then in 2000 those happy days came to a crashing halt. 

In March 2000 the markets peaked and portfolio values began to decline.  High tech companies began shrinking and thousands upon thousands of jobs went away.  More people became unhappy as 2001 turned into 2002.  Even the most optimistic of investors were vanquished as rally after rally fizzled.  

About this time another interesting change occurred.  With the first change people became overly confident in their abilities.  Back in ’99 they had all the answers.  Now they didn’t even know what the questions were.  They began to spend a great deal of time engaged in a most familiar but destructive behavior.  Hindsighters wanted to know why they hadn’t seen the market peak in 2000?  They should have known to move out of the technology stocks.  They should have sold their Sun Microsystems when it was 125.  They should have dumped that aggressive technology mutual fund.

Fortunately that ugly destructive time is over for most of us.  We all are human and it is easy to succumb to those natural tendencies to second-guess our decisions.

Now many people think it might be a safe time to go back into the market.  

We now know we probably bailed out at exactly the wrong time.  We finally moved the last amount of our investments into cash, only to see the market hit a bottom a few days later and then began a steady if not spectacular climb up.  Fortunately this time around we did not beat ourselves up too bad.  We just wanted to get things back on track.

This time around though, you have made a promise to yourself that things are going to be different.  You have decided you are going to put together an investment plan and stick with it.  You have even decided to find someone to help you with this plan.  

Finding the help you need

In the search for an advisor everybody has his or her own list of questions to ask.  Some of them are pretty obvious and certainly need to be asked.  Others are not so obvious and are seldom asked.  In this latter category there is one in particular that is almost never asked.  Maybe people are getting the answer in a roundabout way, but it is an important enough question to be asked directly, anway.  

We will get to that question in a bit, but first let’s start with the obvious ones.  

Is the advisor independent?  Are the products they offer proprietary?  This question gets to the heart of the types of products and services that are going to be offered to you as a client.  Proprietary products mean they can only be purchased from a particular group of vendors who typically charge higher fees or commissions.  Furthermore if you decide later on to take your business elsewhere, you may have to sell those products to transfer your account.  That can create a number of problems including unnecessary taxes.  

Does the advisor have a network of other advisors that can be called on for specific needs that you may have?  Are you limited to one choice or does the advisor give you a list to choose from?  Again the focus is on choices based on your needs, not the needs or agenda of the advisor.

How does the advisor get paid?  Is it based on fees, commissions or hourly charges?  Commission based services may open the door to unnecessary influence or coercion.  With fee based services the client knows more clearly the fee schedule as well as knowing that the goals of the advisor are more in line with the clients.  The more growth there is in the account, the happier the advisor and the client are going to be.

Another good question to ask is to request a copy of the advisors ADV form.  This document provides a wealth of information about the advisor, the types of clients they work with, their fee structure and the types of products and services they offer.  On the front of this form a prospective client can also find the advisor’s CRD number.  The CRD number is unique to each advisor and anyone with a securities license has one.  With this number a person can log on to the NASD website, research the advisors disciplinary history and determine if there are any incidents of improper and/or illegal behavior on the part of the advisor.  

While all of these questions and many others that come up are important, the question that is seldom asked and is the most important question is simply:

Can I trust you?

When it comes right down to it nothing else really matters.  Nearly all of the products and services in the financial services industry can be purchased on the Internet or through traditional sources such as banks or brokerage firms.  The products really don’t matter as much as the relationship you have with your advisor.

So, if you find yourself in search of a financial advisor, go ahead and ask the questions that everybody else has asked.  But if you only ask one question, look them in the eye, peer into their soul and ask them if you can trust them.  Then sit back, be quiet and listen to not only what they say, but also how they say it.  

Their answer will be your answer and you will know right there and then if this is the person you want to work with.  Finding that perfect fit for you will be the beginning of investment happiness.  
 
Contact Mark Neil at:
Northwest Wealth Advisors, Inc 
0605 SW Taylors Ferry Road
Portland, OR 97219
Office: (503) 478-6632 
Fax: (503) 595-1863 
Email: mneil@nwwealtadvisors.com 

© 2003 Mark Neil