A Completely Unbiased and Comprehensive Guide to Selecting a Investment Adviser

"It is much more profitable to sell advice than to take it." - B.C. Forbes

     I was recently talking to a potential client and it was evident he was having a difficult time choosing whether to hire me or another investment adviser. It made me think about the fact that most people have no idea how to choose a good investment adviser. In fact if you know enough to choose a good investment adviser you probably know enough to manage your own investments and therefore have no need of an investment adviser. Since I am an investment adviser I cannot offer any objective advice on how to select one (the title of this blog is meant to be humorous), but I can, and will, offer my completely one-sided, self-serving opinion. Whether you agree or disagree will be mostly a function of your pre-existing beliefs, and if you can prove me wrong, or right, with well reasoned and researched arguments you probably do not need me or this guide. If, however, you like this post and are looking for an investment adviser you should message me; we can get together to talk about your money and goals while sipping coffee... through straws... past our face masks.

     So here are some things to look for in an investment adviser. In no particular order.

• Low fees. An investment adviser should take seriously his or her responsibility to maximize your wealth by charging you a fair price. As the late Jack Bogle was fond of saying: "In investing you get what you do not pay for." It is OK to pay for investment advice, but never over pay. If you are considering two or three investment advisers and are unsure of who to pick choose the cheapest one.
• No hidden costs. An investment adviser should always be up front and explicit about how and how much they are paid. Avoid investment advisers that are paid commissions for selling you investments. This arrangement directly incentives the adviser to sell you overpriced junk in order to provide for their families. Even honest advisers are going to struggle to be ethical fiduciaries when what's best for you is in direct opposition to their boat payment.
• No promises of out-performance. If an adviser ever promises they can beat the market, or even suggests that it is likely don't walk away -- RUN! Beating the market is incredibly difficult and only a tiny percentage of people have done it with any kind of consistency. If you are paying an adviser to help you outperform the market you are not getting your money's worth. Any adviser who offers to help you beat the market should also explain to you that the chances of being successful in this ill-advised endeavor are well below 50%.

And here are a few things that one should not rely on in choosing an adviser.

• Impressive Credentials. When investors are choosing an adviser they may default to looking at where they went to school or how many letters they have after their name. However, although expensive education and impressive experience are common heuristics for wisdom and skill, they are rather poor indicators of an individual's actual abilities as an investment adviser. Wise investing is not terribly complicated and an adviser with years of education is just as likely to over complicate things than he is to add value, but all of that education is certain to make him more expensive. Furthermore, you know who else had impeccable credentials?
• Status Symbols. If your investment adviser shows up to your first meeting in a late model Benz wearing a $3k Armani Suit and a $10k watch you should definitely hire him because he wouldn't be able to make all that money if he sucked right? Wrong. Making all that money is not a result of sucking or not sucking. It is the cause of sucking. Literally. Sucking the money out of your portfolio and into his lifestyle. If your investment adviser arrives to your meeting in an 11 year old Hyundai Elantra wearing a well worn suit from Men's Wearhouse and a Timex Ironman, that's the guy you want to hire. He may be getting rich by overcharging his clients just like the other guy, but at least he isn't flaunting it. The same thing applies to the plush office (or any office for that matter) the nice house, and the cute receptionist.
• Buzz Words. Investing is simple. If you get the feeling that your adviser is deliberately talking over your head. He is deliberately talking over your head. If he tries to shock and awe you with complicated words and impress you with his "proprietary derivative evaluation methodologies," head for the door. If he cannot explain his recommendations in words that you do not understand it is because he does not want you to understand or because he does not understand himself, either way GET OUT!

     I'll leave you with a final offer which may or may not be helpful. Many advisers offer third party portfolio reviews. Treat your investment adviser like your insurance provider and rebid every three years. It never hurts to get a second opinion and you may discover some pretty big holes in your current adviser's strategy. I am currently offering complimentary third party portfolio reviews for a limited time. If you are interested in seeing just how much your current investments are costing you and getting a second opinion on the risks you are exposed to contact me for a free, no obligation portfolio review. 

Disclosure: Joe Bailey is a Registered Investment Adviser in the State of Nebraska. All investments involve risk including the possible loss of the money you invest and past results are a remarkably poor indicator of future outcomes. Joe Bailey may recommend investments that he owns personally or recommends to other clients. Third Party Portfolio Reviews are offered at no charge for a limited time, Joe Bailey reserves the right to discontinue this offer at any time without notice, but no person will be charged for any service unless they are informed beforehand that they will be charged and given, in writing, the exact cost of the service to be performed.