What a Good Financial Advisor Does

The market crash was a stomach-churning time for most advisors and–dare I say it–especially for those of us who consider ourselves financial planners first. We knew that after the dust settled, our clients’ financial plans would look very different from a year ago. Predictably, the markets have recovered, and those advisors who were able to persuade clients to stay invested are enjoying a relatively quiet summer. Or are they?

The fast rebound from the March lows has created its own set of challenges. Decisions made to reduce risk by rebalancing, increasing fixed income or cash, or to dollar-cost average in new investment dollars, now seem ill-timed.  Clients who liked this strategy well-enough six months ago are now getting impatient to be fully invested, so as not to miss out on market gains. Memories are short. When markets are as crazy as they have been, it’s hard not to second-think decisions and fall prey to some of the bad habits of individual investors who chase performance and buy high and sell low. The conflicting and ever-changing outlooks from economists and market pundits only add to the noise.

It’s at times like these, that I pull out a copy of my all-time favorite investment book: Nick Murray’s The Excellent Investment Advisor.

It was written in 1996, but Murray’s perspective on investing might be more relevant today than when it was written. This may sound strange, but I find Murray’s writings comforting. He reminds me why I wanted to be an financial advisor in the first place. He also points out that I don’t need to be an expert in economics or a market junkie to be an excellent advisor.

Here’s a few of my favorites passages in the remarkably eloquent first chapter. If you don’t have time to read the whole book, read this chapter at least. It’s worth it.

“.at the end of an investor’s life, less than 5% of his total lifetime return will come from what his investments did versus other, similar investments. The other 95% will come from how the investor behaved. And the primary determinant of that behavior will be the quality of the advice he got, or didn’t get.”

“Since the excellent investment advisor is forever asking the client to do counterintuitive things (e.g. double up on his dollar-cost averaging program when the Dow drops 30%), trust will forever be the critical issue.”

“Investments must never be allowed to become an end in themselves, but must be seen as means to and end of achieving the Great Goals of Life for the client and his family. Thus, a particular investment–or even a whole portfolio of investments–ought not to be judged  on any other basis than whether it’s appropriate to the client’s long-term strategy.

“A market orientation is always and everywhere a short- to intermediate-term focus, which is entirely incompatible with a lifetime investment strategy.”

What a financial advisor needs to do, Murray writes, is to instill trust. Let your clients know that you care about them, and they’ll be inclined to follow your advice. Then, the advisor’s role is to develop sound, long-term investment strategies that will help clients reach their financial goals.

About the author

Cathy Curtis, CFP®

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Copyright 2014 FiGuide.com   About Us   Contact Us   Our Advisors       Login