In this article, we address why we believe the decision of hiring an advisor should not be based solely on fees. The quantity and quality of the services provided varies greatly from advisor to advisor.
When you interview potential advisors, you should look for the advisor who gives the best advice and is the best fit for you. The best advisors begin earning their fee from the day they are hired by helping you determine your most appropriate asset allocation, according to your unique ability, willingness and need to take risk. This is what we do with every single investor who becomes a client.
In determining your need to take risk, we will typically run retirement projections. This can be a particularly eye-opening experience if your portfolio is much more aggressive than needed.
However, many people believe all advisors using Dimensional Fund Advisor (DFA) funds (including those with very low fee schedules) will provide advice and service of equal quality. Investment advice is not a commodity. There is no free lunch. Hiring an investment advisor is an important decision, and all factors should be considered. We believe that high quality and high levels of service are typically accompanied by a fair price.
Examples of Bad Advice or Service
The Value of Good Advice
When selecting an advisor, fees are an important consideration. However, you should also consider the services offered for those fees. Some value-added benefits we provide include:
Making the Decision
When hiring an advisor, we strongly advise meeting the advisor in person. This is the best way to determine whether you can truly trust this person with your financial future. Many times, low-cost/low-service providers will only communicate via telephone and e-mail. Further, these advisors likely have 500 to 1,000 customers, making it nearly impossible for the advisor to have any type of personal relationship.
The key to making the decision is finding an advisor who you believe will give you the best advice and is the best fit for you. When making this decision, be sure to consider not only the fees advisors will charge but the services they will provide. While good advice doesn’t have to be expensive, bad advice almost always costs you dearly.
Copyright © 2013, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.