Outside voices and views for advisers

If friends asked you to recommend an adviser, could you?

It's not an easy answer; there are many factors to consider

Apr 3, 2018 @ 9:17 am

By Joni Youngwirth

Good friends ask you for a referral to a financial adviser. You've known this couple for decades, and you and your spouse socialize with them regularly.

In their mid-60s, they're do-it-yourselfers and seem to have made smart financial decisions so far. They appear to be easy millionaires in terms of investible assets. They have no overt financial issues from what you can tell. (But, of course, there always are.) Their adult children have successfully launched their lives and careers and are providing an increasing number of grandchildren. For a variety of reasons, you all agree whomever you refer their way shouldn't be you or another adviser in your firm.

You have been active in industry organizations and have a wide, cross-country network with countless advisers to choose from. What criteria will you use to select an adviser who is worthy of your good friends now and in the years to come? The list you come up with will reflect telling points about our industry's future—or at least your perception of it.

Everyone seeks the obvious: solid ethics, good service and respectable relationship skills. What else influences your choice given everything going on in the industry? Here are a few considerations.

Solo versus ensemble. A solo firm owned by a boomer would not work for prospective clients looking for an adviser to outlast them. The average adviser is 53, and boomers need someone with a team that can continue working with them for possibly decades.

(More: Boomers: Envision your business transition plan)

Modernity. Personal connections are important, but technology-based review meetings are fulfilling the needs of clients who are strapped for time. Baby boomers are the biggest users of Facebook and connect with grandkids through FaceTime. Most are sophisticated enough for at least some technology-based reviews.

Business model and transparency. RIA? IAR? Hybrid? B/D? While these distinctions may not matter to a prospective client today, the issue is hotly debated within the industry. Certainly this criterion will be a part of your decision. Beyond the issue of the firm's business model, fee transparency and how an adviser charges require more explicitness than many firms currently offer.

Excellent service and relationships. Not all clients want to be buddy-buddy with their adviser. Those who do want someone whose actions are genuine rather than contrived. Service and relationships will become even more important in the future. "Good" will not be good enough.

CFP certification. Do advisers need this? Yes. You may want your referrals to have other designations as well, but politics aside, this one is the most enduring and best recognized.

Financial planner and investment manager. From the clients' perspective, this is not an either/or characterization. They expect both. Scoffing that a "70-page financial plan" is overkill is as "scoffable" as providing no documented financial plan.

Branding. A brand that hints the firm is dependent on any one individual is dubious. Inclusive branding is becoming the norm.

Growth. Firms need to grow. Flatlining is a kiss of death. Lifestyle practices where the advisers are easing into retirement won't be around for the long haul, though a lifestyle adviser within a larger ensemble firm is manageable.

History. Firms with history fare better at attracting clients than newly established firms. That leaves out robos, which are currently in beta mode as we all watch how they survive market volatility. Will players like Amazon make it in this industry? Maybe. Stick with what you do know for now.

Diversity. Our industry can no longer be known as being made up of mostly white, male advisers. Firms that prioritize diversity will fare better long term.


Ensembles with multiple generations of advisers are a good starting place. Firms that embrace technology to the maximum will be the norm. Advisers who deliver both financial planning and investment performance are a must. Growing, diverse firms need to become common. The CFP is here to stay.

Some advisers see what's going on but ignore the trends. Others don't see the industry shifts.

Do you remember independent travel agents? They came — and they went. The point? All firms need to seriously strategize and adjust for a new marketplace, or they may find they have no future.

So, to whom would you refer your friends?

(More: 2018 and beyond: Business planning, and questioning)

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.


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