Answers to Your Burning Advisor Questions, Part 4: Chemistry Matters

We recently covered the kinds of answers you might look for when interviewing an advisor about her qualifications and experience, the answers you’ll want to look for regarding the services provided, and some considerations about compensation. Here, in the final part of this series, we’ll look at the advisor answers that will tell you the most about one often overlooked component of the advisor-investor relationship: chemistry.

The original column included the following questions about fit:

• How do you prefer to work with clients?
• How much contact do you typically have with them?
• How will you keep me informed about investment performance and changes in the markets that impact me?
• How often will we review and adjust my financial goals?
• Give me an example of how you would explain a financial concept or product to me.

Why Chemistry Matters

If you’re good at being a physician, chances are that your services are in great demand. The same is true for the best advisors. Chances are that both of you have pretty busy schedules, so the shorthand that often comes with the territory of being on the same page can be particularly important.

Does your advisor favor highly aggressive strategies, or does she take a more wait-and-see approach, often buying and holding a stock for some time? Is your advisor frequently coming to you with new ideas, when you’re pretty satisfied with how your portfolio is performing now? These stylistic quotes matter more than simply finding out if there’s a match. If you’re envisioning explosive growth, but your advisor is looking at a slow and steady approach, there might well be a misunderstanding of your financial goals.

Set the Expectation

As the investor, you have to set the tone for the relationship with your advisor. You’re paying for the services provided in some fashion, so make sure you establish and enforce how often you’d like to do things like rebalance your portfolio, revisit your financial goals, and review investment performance. Also, set parameters if you don’t want to be consulted on every decision and on what kind of authority you’d like the advisor to have when investing on your behalf.

The more you get to know your advisor, the more opportunity you’ll have to build a level of trust that will be very important to you going forward. The fit between you and your advisor may seem less important at first than the advisor’s performance record, but you may find over the long haul that—just as it is in medicine—chemistry is essential.