While looking for a feature photo for my articles on using a financial advisor, I only found ones like this:
The pictures show either a couple sitting across the table at the advisor’s office or the advisor coming to their home. The common phrase for working with an advisor is “sit down with an advisor.” Obviously it’s not saying you shouldn’t be standing up; it implies you should work with someone local.
The popular lead-generation sites for fee-only advisors — NAPFA, FPA, Garrett Planning Network — all lead the search by your zip code, because most people look for one local to them, as people do when they look for a doctor, or for that matter, a car mechanic or a plumber.
Besides the mom-and-pop fee-only advisors found on NAPFA, FPA, or Garrett Planning Network, who else are local?
You have your investment person sitting in a bank or credit union branch. You have people working at Fidelity or Charles Schwab branches. You have people working for Ameriprise, Edward Jones, Merrill Lynch, Morgan Stanley, UBS, Wells Fargo, and a number of other companies. People representing insurance companies such as Northwestern Mutual and New York Life offer investments too.
Why are they local? Because people believe their advisor must be local.
Is it really necessary to have your advisor local to you? The advisors I listed in my article The Average Investor Should Use An Investment Advisor: How to Find One are located in different parts of the country. I didn’t even mention where exactly they are.
What makes an advisor local to you better than an advisor far away? Nothing. Unlike a doctor, an advisor doesn’t have to touch you in order to figure out what’s best for you. Good advice is good advice whether it comes near or far. I can understand people want a local bank branch to make deposits and withdrawals, but trades are executed online anyway.
At work, I routinely work with colleagues two time zones away. We exchange emails and documents. We go on conference bridge lines, often multiple times a day. Sometimes we talk to people on another continent via video conference. We get quality work done.
When I had the consultation with the Vanguard advisor, I didn’t care where she was. I spoke to her by phone and via video conference. She answered my questions just as well as she could if I were sitting in her office.
We all tend to think our own questions, problems, and challenges are unique when in fact they are actually very common. Even though the Vanguard advisor didn’t have 20 years of experience in finance and investing, her answers were on target. My questions didn’t require 20 years of experience to answer. As a salaried advisor getting clients handed to her day in and day out, she must have a lot of practice, probably way more than the independent CFPs who spend more time in prospecting.
If you limit yourself to someone local, you will miss the good advisors in terms of both quality and cost. Local people have better skills and more practice in sales and marketing, not necessarily in advice. If you just look around, or you answer calls from local people, or you take referrals from friends or family, you more likely will find a salesperson, if only just by the law of numbers.
Look beyond your local area for your financial advisor.
[Photo credit: Flickr user SalFalko]
Say No To Management Fees
If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.