Evaluating Your Advisory Relationship

Evaluating Your Advisory Relationship

How should you measure the success of your financial advisor relationship?

For the most part, the primary way in which many clients evaluate their advisor is simply how their portfolio is performing.  But, should it be based on investment returns?

It’s at least a piece of data that should be easy to find (one would hope at least).  And generally speaking, comparisons are pretty easy to find considering it’s on the news, online, in your twitter feeds, and so on.  However, most single indexes would be terrible comparisons for an asset allocated portfolio.

In any case, are portfolio returns what you should base the success or failure of your advisory relationship on?

I would say, unquestionably not.  That’s not the same as saying that portfolio returns are unimportant because they certainly are.  But they don’t come close to being an effective way to evaluate your relationship.

So, how might you do that?  Let me offer a couple ideas for consideration.

Ideas for Evaluating Success:

  • Everyone should begin measuring their success at least to some degree is where you stand in regards to your goals and whether you’re making progress toward those goals.  When reviewing a financial plan from a few years back, how closely were you tracking to your goals?  Were you about 75% on track for reaching your goals, and now you are 90% on track?
    • I should add a disclaimer though in defense of advisors that making constant straight-line progress towards goals is not necessarily in your advisor’s control because market performance is not in their control.  For example, if we’ve recently experienced a market downturn, you may be ‘less on track’ than you were a few years back on a percentage basis, but it doesn’t mean you aren’t progressing.  The key is to ensure that you’re consistently reviewing numerically where you stand in regard to your goals.
  • What else have you accomplished that you might not have accomplished without your advisor?
    • Did you finally complete your estate plan?
    • Did you manage to get your trusts completely funded?
    • Did you restructure your debts to make them more friendly long-term and put that money to good use elsewhere?
    • Did you successfully fund a child/grandchild’s education?
    • Did you complete a business evaluation and establish future plans for your business?
    • This list could go on and on.
  • It could simply be a feeling that you feel like you are heading in the right direction.  It could be the level of trust that you feel with your advisor.  It could be that you’ve become friendly enough with your advisor that you’re cooking out together.  It could be that they make you truly think about what you find the most valuable in your life or that they’ve helped to clarify your values and overall life philosophy.
  • The final area I’ll mention as a way to measure success is how excited you are to hear from your advisor and whether or not you find enough value in your meetings to eagerly schedule the next appointment.

As Albert Einstein said, “Not everything that can be counted counts, and not everything that counts can be counted.”

In reality, the true way to measure success should be a combination of all of the above.  Because you could ‘feel’ like you’re making great progress, but if your advisor never shows the numbers to support that feeling, you may not be getting great advice.  So, numerical evaluations should be table stakes.

Though, once you get past that, I’d venture that most relationships should be measured by your level of enthusiasm for your advisor and if you’re excited to pick up the phone when they call.  If you find yourself dreading the phone calls or purposefully delaying scheduling a meeting with your advisor, it may be time to seek out new help.

There are no right or wrong ways to measure success, but hopefully, these ideas can aid you in the thought process.

Feel free to leave any other measurements of success in the comments.



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