Is Your Advisor Competent? | Brandon Averill, Justin Dyer | AWM Insights #102

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Episode Summary

All advisors are willing to try to help. The problem is many do not have the right ability. Vetting an advisor for competence is a must for those wanting to create wealth. It also isn’t easy due to the incredible amount of designations or certifications that can be obtained with little effort involved.

If you are serious about putting the right team around you, the minimum is to require a CFP®, CFA, CPA, and CPWA® on your team. This is the minimum an advisor can do to prove to you they are serious about having proper knowledge. An advisory firm that really cares about you and your money will require their advisors to have these before ever advising. It is lazy for any advisor in the industry to not obtain one of these, all they require is effort.

After that, it’s time to evaluate what their experience level is with people like you. Hiring someone that doesn’t specialize in people in your situation is a recipe for failure. If you are a professional athlete, you will leave a lot of money on the table by working with someone that doesn’t focus on pro athletes. There are too many nuances and insider knowledge that comes from years of working with professional athletes that can only be learned through experience.

Trust your instincts and if they sound more like a salesman or sounds too good to be true, don’t settle. There are competent, knowledgeable advisors that are in it for the right reasons and have your best interest at heart.

Have questions for an upcoming episode? Want to get free resources, book giveaways, and AWM gear? Want to hear about when we release new episodes? Text “insights” or the lightbulb emoji (💡) to Brandon at (602) 704-5574 to join our new AWM Insights Network. On an iPhone? Click HERE to join.

 


Episode Highlights

  • (0:52) How do you look for competence in an advisor?

  • (1:30) How do you sort through 130 financial designations?

  • (2:58) Cutting through the noise and requiring your advisors to have the best designations is a smart strategy.

  • (4:14) CERTIFIED FINANCIAL PLANNER™ or CFP® should be the minimum that you require when it comes to general knowledge.

  • (4:46) Certified Public Accountant or CPA specializes in taxes and is an integral part of tax planning.

  • (4:54) Chartered Financial Analyst or CFA specializes in investments. This is the gold standard for investment management.

  • (5:00) CPWA® or Certified Private Wealth Advisor® covers the most advanced strategies that are needed by the ultra wealth to manage taxes and implement proper estate planning. 

  • (6:30) You can’t rely on designations alone but if they aren’t at least putting the work to pursue these then you must question why they should be your advisor.

  • (7:33) Does their process work? Are they a salesman or do they really add value through comprehensive financial planning?

  • (9:09) Integrated planning should maximize after tax return and net worth. 

  • (10:00) If you only look at a statement’s rate of return you are missing out on the big picture of wealth creation.

  • (11:15) It’s common acceptance that no one can predict the future except so many in the financial media claim to be able to do it every single day.

  • (12:07) It is unproductive to try to predict the future. Planning for good outcomes and bad outcomes is where to focus your effort.  

  • (13:03) A crisis wouldn’t be a crisis if everyone knew it was coming.

  • (14:45) If you are a pro athlete, working with someone that doesn’t specialize in pro athletes will cost you money and wealth.  

  • (15:23) Duty days, MLB, NFL, PGA retirement plans are all something many advisors have no clue on.

  • (15:41) If you need heart surgery, do you go to an orthopedist or psychiatrist. No, you got to the best heart surgeon out there.

  • (16:19) Use your B.S. meter. Trust your gut feeling and if they sound more like a salesman or it sounds too good to be true, don’t settle. There are competent, knowledgeable advisors that you can find to grow a strong personal relationship for the long term.

  • (17:45) Sum it up: find an advisor that avoids active trading and market timing. Find one that develops a solid financial structure, that focuses on tailoring investments to your priorities, and keeps taxes and expenses low. This systematic approach will increase your likelihood of financial success for the long term. 

Stay Connected

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Justin Dyer: LinkedIn
Brandon Averill: LinkedIn

+ Read the Transcript

Brandon Averill (00:02):

Justin, welcome back, obviously, we took a little deviation last week. Got into a little of Ukraine and what's going on, more specifically in the world today. But, we're going to jump back on schedule here. Going back a couple of weeks ago, we talked about, if you do decide to hire that advisor, where do you actually go? Where can you access these people to help you out with your finances, and I think we had some fireworks. It was a lot of fun but we're going to turn now a little bit over to, not only where do you go, but once you get there, if you decide, "Hey, I want an independent firm. I want an independent advisor," or for some reason you mixed up our messages and you're headed to the wirehouse when you get there-

Justin Dyer (00:48):

That's not far off of point.

Brandon Averill (00:50):

Yeah, right? When you get there, what should we be looking for, because just being an independent doesn't mean that there's a high level of competence there. You still need to evaluate whether those advisors are a good fit for you. So, let's dig in today a little bit about what makes an advisor competent, what makes them a right fit for you. We know there's a ton of financial advisors out there. I think, last I checked even, and we'll probably get into credentials here pretty quickly, but the FINRA websites and broker check that we sent everybody to last time. I think they list over 140 designations so, how do we sort through this world, Justin?

Justin Dyer (01:34):

Yeah, well part of the problem is probably no one or very few people actually know what FINRA is. FINRA stands for Financial Industry Regulatory Authority or what's called a self-regulatory organization. Somewhat lives under the auspices of the Securities and Exchange Commission, the SEC, which probably more familiar with. So, that's almost one of the issues right there. Unfortunately, the financial services industry is in a high demand. It provides an aggregate, it provides a really good service, but there's limited regulations in some cases, there's extreme regulations in other cases. And really getting into this topic specifically, there's no restrictions on truly who can call themselves a financial advisory.

Justin Dyer (02:24):

There are some really kind of bare-bones restrictions and some licenses you need to actually either sell investment products and get a commission from it or actually provided by some charge of fee for that. But those exams are super, super basic. It's like a two, three-hour exam pretty easy to knock out and not... Those aren't the things that people really go to assess competency. So how should we cut through all this noise? I mean, not a straightforward answer, but one place to start is designations. Unfortunately, like you said, Brandon, there's 140 of them out there. You can probably get rid of 135 of them they're just meaningless.

Unfortunately, what happens in our industry because it's such a noisy field of kind of no barriers to entry people go and pay basically for this alphabet super designations at the end of their name. And it's super easy most of these and we'll get into the important one least in our view and definitely, this is backed up by kind of real industry standards. But a lot of the times a "financial advisor" can just pay whatever, 500 bucks, 1,000 dollars the price is all over the place, go and kind of sit down and take a super easy test for one or two hours and they get a designation and they slap those letters at the end of their name. And no one really stops to ask, "Does this actually mean anything" or very few people actually stop to ask the question, "Do these actually mean anything?"

Justin Dyer (04:07):

So cutting to the chase, really what the more important designations are your certified financial planner. That is, that's kind of the table stakes too I would say. This is your general practitioner. Hey, we know a lot, we know a lot about a number of different topics. We're not necessarily experts in any one of those topics, but we have a really good understanding of retirement planning, taxes, investments, et cetera, et cetera, all these core competencies within the study or the subject of financial planning.

Justin Dyer (04:42):

And then you can get your subject matter expert type designation, your CPA, Certified Public Accountant, obviously, that's your tax expert, Chartered Financial Analyst, or CFA. Those are really the experts on the investment side of the side of the equation. CPWA is something we actually put a lot of stock in a lot of our team, Brandon, including you has that designation. And really what that is it's similar to a CFP, but it's taking it to the master level, right? You're really diving in deep for much more of the high net worth, ultra-high net worth space, where, estate planning, taxes, those type of subjects become a little bit more complicated. So in our opinion, those are really the four that truly mean anything and almost anything else can be kind of thrown out of the equation from a competency standpoint.

Brandon Averill (05:42):

Yeah, and I would say this, isn't only just our opinion, right? I think there's somebody in our industry, Michael Kitces. He produces a lot of content for advisors, for consumers as well, and he actually does a fantastic job of breaking down all of the designations. So far more than these four that we've indicated. So definitely encourage anybody to, we'll link to the show notes how to get to his website, but he walks through all the designations on what they are and I think the CFP, for instance, like you mentioned baseline, Erik's fond of real being opinionated on this, that if you don't have the CFP just don't let him through the door. I think he says that tongue in cheek, but the reality is it shows that you're at least willing to do the minimum, and let's be clear.

Brandon Averill (06:34):

There are a lot of bone heads that have the CFP as well, right? There are some people that really don't know what the heck they're doing and they've got the CFP so you can't just rely on designations alone, right? There, are CPAs that don't know the tax code it's been so long. There are CFAs that probably have no idea about financial planning because it's mostly an investment designation. So you get the beauty of people like you, Justin, who married the CFP and the CFA and you become a, I don't know, rocket scientist of sorts in the financial world. But I think we got to go beyond these designations, right? They're a starting point like you said, and what I would say the next evolution is okay, let's make sure that they've at least put the work in.

Brandon Averill (07:20):

Let's make sure they have a dedication to their craft. At some level, they pursued one of these designations that are worth something. And then let's move on to, "Does their process actually work?" "How do I evaluate that?" "Is it based in evidence or is it more of a salesman-type philosophy?" And then make sure that it matches your philosophy so are you looking for investments only? Do you think that the way the world works is if you're a tarot card person you're going to go get your horoscope read, maybe you're okay with the prediction of the markets and you don't really need evidence, or are you looking for something that has a proven track record of success? It's not somebody that's trying to sway you one way or, another with some fancy predictive model or something like that.

Brandon Averill (08:14):

Or are you looking for integrated services? Are you looking for a holistic plan? You want somebody that you can go to, that's not just going to tell you about some hot stock, but is rather going to lay out, "Hey, this is what successful financial planning looks like. This is how we're going to make you a successful financially overall." Then fee structure how do they charge, does that resonate with you? I think those are all things to start to consider. When you start to look like, "Hey, does this philosophy make sense to me?" "Does it seem like we're on the same side of the table?" "What am I looking for?" Holistic, investment only, taxes, et cetera. Obviously, we're opinionated on what works for most people, but maybe talk about that a little bit, your opinion on that, Justin.

Justin Dyer (09:03):

Well, definitely running with that. The integrated aspect of it just looking for investment advice it's not terrible, but it's not complete in our opinion. And I'm saying this as the investment person on the team, the investment guy, we love to say and I think it's a really powerful statement. If you think through it "If you have one net worth, you have one effective tax rate", your planning, your engagement with an advisor should be oriented to maximizing both of those two things. If you take that a level further, a level below, down, whatever you want to say, you start to see that is investments, that's income, that's charitable, that's insurance et cetera, et cetera, et cetera, all on down the line. And just only focusing on investments maybe the guy's good, or maybe they have a good year and you get a good rate of return, but are they doing that in a tax-efficient manner?

Justin Dyer (10:03):

If you're looking at things in isolation and not taking all this other stuff into account you're missing something, right. And so thinking about this in an integrated, individualized really holistic manner is incredibly, incredibly important, incredibly powerful. It's a little bit more nuanced and complicated, right? It's really easy to get your statement or look at your investment performance. "Oh, there's my performance." Five, 10%, 20% performance, great, well what does that app on an after-tax basis? What does that do to the other aspects of my life? Are there some charitable opportunities that we could have taken advantage of, et cetera, et cetera? There's just more to it and you can really maximize your overall wealth by, having an integrated approach. The other thing I definitely want to hit on, especially from an investment standpoint is the crystal ball predicting the future comments you make.

Justin Dyer (11:00):

It is astounding to me still in this day. I feel like it's such a cognitive dissonance at such an astounding level where it's common acceptance or at least it seems like common acceptance to me that no one can predict the future. Yet, people still constantly try and do that. One of the things we always try and touch on, "Hey, what's going on in the world today?" That is potentially relevant to this, this overall, the topic that we're talking about on the podcast on any given week this is a real broad topic. So it's hard to find something to pinpoint on it, but we talk about the noise of the financial media or media in general. And that's such a perfect example you go on Yahoo Finance, Bloomberg, every single day.

Justin Dyer (11:49):

You can almost find an article about somebody who maybe out of one side of their mouth, say we're not predicting the future, but on the other side of the mouth, like they can't help it, they want to try and predict the future. It's such an unproductive conversation to have as society, we just know we can't predict the future. We know we can set ourselves up and we can plan for uncertainty and that's what you should do. But don't go down this route of reading the tea leaves and predicting what's going to happen tomorrow. Just think about the last two years, how many kind of out of left field things happened? A pandemic, a war in Ukraine, lockout lasting much longer than we thought it was going to last.

Justin Dyer (12:42):

So just all these little things kind of factor into it. I would say too, by kind of by definition from an investment standpoint, crises are what drive large contractions in the market, and by definition, a crisis is almost unpredictable. I don't know if it's clearly defined like that anywhere, but a crisis wouldn't be a crisis if everybody knew it was coming.

Justin Dyer (13:07):

So anyway, a little bit of a tangent there, but it's obviously something I have strong opinions on, so yeah. Don't go down the investment-only route unless you're really confident that's all that you need and thinking about things in an integrated fashion really will provide substantial, should provide, we got to always qualify things, should provide substantial value over the long term.

Brandon Averill (13:34):

Yeah, I couldn't agree more, Justin. And I think the last piece that we'll leave everybody with high-level and then we'll get into some takeaways. But okay great, we've gone through this process, we've started with the designations we've weeded out probably 90% of people because they're lazy and won't go get the designations, and we've land on, "Okay, I've got a CFP there's CFAs on this team, they provide holistic advice, I'm sitting pretty, and I'm now into three or four different groups that have all those qualifications." The last layer that we would advise people is, "Do they actually work with somebody like you?" We see this all the time we have a lot of respected colleagues throughout the financial industry. I'm in a study group with several of them, very, very high-quality firms here in Southern California.

Brandon Averill (14:31):

They're really good at some things that we aren't, or working with certain types of people and that we happen to re... Experts in working with a certain kind of clientele as well. So I'll talk from, for instance, if you are a professional athlete you don't want to go to a firm that's never worked with professional athletes, even if they have all the designations, their business model is awesome, their philosophy is great. The problem is there are just certain nuances that are going to get left on the table. There are clients that probably are much better fits for other firms than us. Athletes happen to be one of our specialties so you want to find somebody that just because if nothing else, they just work in it day in and day out, they may be more familiar with duty days.

Brandon Averill (15:20):

They might be more familiar with your MLB 401k plan or the NFL pension plans or the PGA plan. Those are all things that we're intimately involved with so we just may know some of the nuances a little bit differently. I thought this analogy was fantastic, but if you were about to have heart surgery how do you go about finding the right surgeon? Are you going to go to the orthopedist that fix your elbow, or go to this psychiatrist that maybe worked with your brain a little bit? No, you're going to find the best heart surgeon out there, even though that orthopedist might be the best in the world at what he does so I think this is kind of that last filter, one of those last filters that gets you into a really good spot.

Justin Dyer (16:10):

I want to add they'll... I don't want to say it's the most important, but in some ways it is, use your BS meter. So often in financial services, because the low barrier to entry, you end up getting very good polished salesman, but not competent advisors. I think humans, or most humans, are pretty good at flushing that type of stuff out. Is this somebody who you can just trust and you get a good gut feeling with after you've checked a lot of these more qualitative, or quantitative, type boxes?

Justin Dyer (16:52):

At the end of the day, this is about an important and long-term, long-lasting relationship. And if there's anything kind of on that last more interpersonal type level that topic where there isn't that connection, there's a little bit of a BS meter, or a question in the back of your head. That's potentially a red flag there, at least a yellow flag because you want this to be a long-term relationship. A good advisor will, or should, add increased likelihoods of successful wealth generation over the long term. And one of the key components in, and actually realizing that is having a good personal relationship, in my opinion, with your advisors.

Brandon Averill (17:41):

Yeah, no doubt. And I would say if people have been listening to this podcast and listened to us, talk for a while and it's resonating with you, then I think we just sum it up in a few things. Number one seek out an advisor that avoids market timing, avoids active trading, and selling performance. Rather, what you should be focused on is developing a solid an advisor that's helping you to develop a solid financial structure. That's focused on tailoring to your priorities we've talked about that a lot. Keeping costs and taxes low, and then ultimately working with somebody like you, because that's going to ultimately that's going to put you in a position where you guys are really working together on a systematic approach that's going to give you so much higher likelihood of financial success and wealth-building over time.

Brandon Averill (18:35):

So we'll close out here, but before we close out, I've mentioned a few times over the past few weeks, but we got a new number that we're going to be texting out, some updates on. You'll learn more about the podcast there. We're going to be giving out some swag, et cetera, but go ahead and text me at 602-704-5574 text is actually coming directly to me. I'll actually respond back to you it's not some phantom bot out there in the world. There is a little automated piece of it to get you onto the list, but we're looking forward to your questions and feedback directly. So shoot me that text again 602-704-5574 you can do the little light bulb emoji, throw insights in there. That's how we'll know that or how I'll know that you guys learned about the number from this podcast. So anyways, until next time own your wealth, make an impact, and owe...