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During a recent workshop I was asked, “What’s the best way to monitor my financial advisor?” A surprisingly simple question, but ironically one that doesn’t get as much attention as how to interview and select an advisor in the first place. Therefore, investors working with a new or existing advisor can use these four suggestions to keep an eye on and evaluate their ongoing relationship with their advisor.

Give Them An Annual Check-up

One of the most popular recommendations to consider before hiring an advisor is to find out whether or not they been involved in any securities related arbitration or mediation. However, many times investors don’t go back and re-check to make sure their advisor is still maintaining a clean record. After all, they could be handed a fine or penalty three-to-six months after you start working with them.

The Australian Securities & Investments Commission (ASIC) website is a good starting point where you can conduct searches on companies and financial service providers.

Check up on your advisor at least annually to make sure your relationship is free of red flags and your advisor is maintaining the integrity and business practices that attracted you to them.

Make Sure They’re Consistent

Let me put this one into perspective with a joke I heard several years ago: A couple died and they were on their way to heaven. On the way up the devil stopped them and suggested they take a look at hell. They were surprised at how beautiful it was and the many benefits they would receive by selecting it or heaven. On a whim, they opted for hell but no sooner than they agreed to sign-on things changed for the worse. Confused the couple asked what happened and the devil replied, “you were prospects before, now you’re clients.”

Establishing a relationship with an advisor only to have it unravel can be stressful and time-consuming. A major factor to evaluate is how consistent they are in doing what they said they were going to do. Did they say they were going to call you after your first statement to help explain it but never got around to it? Where quarterly review meeting part of the appeal you used to begin working with them yet six months later you still haven’t completed one. Or maybe you had a hot stock tip you wanted them to research but they never got around to it. One of the main foundations for establishing and maintaining trust in a relationship is the ability to follow through. Don’t let your advisor become evasive or inconsistent.

Rate Their Knowledge And Communication

In the old days, advisors were trained to withhold information instead of share it. The idea was, if clients knew what we knew, they wouldn’t need us. Well, that’s just not the ways things are anymore, thanks in part to pioneers like Jim Cramer who even if you don’t like him or his antics, is a great educator and information provider. These days, clients want to better understand why they own certain stocks or funds and what may trigger the need to change those holdings. They want regular communication that educates and empowers them, not cookie cutter stuff you can buy off the shelf.

Unbeknownst to many investors, many “big box” advisors have scripted opinions and suggestions that’s generated at their corporate office. One clue, look for lengthy disclaimers and don’t be afraid to ask who wrote this piece or did this research. Since no one can predict the future, investors need to put a premium on communication and knowledge that is being transferred to them via their advisor, otherwise what are you paying them for? To buy-and-hold the same stuff forever?

Understand Their Business Model

Here’s the single reality I wish every investor would adopt: Nobody Cares More About Your Money Than You! And since you’re paying an advisor in some way to manage it, make sure you understand how they are helping you grow it and how much that help is costing you.

The way in which advisors are compensated can sometimes to be difficult to understand, so make sure they explain it to you in terms of both a percentage and dollar amount. More so, watch how they answer fee and expense related questions. If they seem evasive or unable to explain their fee arrangements, consider working with an advisor or product provider where the answers are easier to understand and clear cut.

Also, make sure you understand their investment philosophy that drives their business. Today, there is little added value in paying an advisor a commission to select a mutual fund. Furthermore, if they’re going to set-it and forget-it or employ a buy-and-hold philosophy, once again, no point in paying them ongoing commission or higher fees for doing something once. By making sure you understand how they get paid and what they expect to get paid for, investors can better align themselves with an advisor that meets their needs and expectations.

By employing these 4 steps, investors can save time, stress, and money by making sure what they were told in the beginning remains steadfast throughout their relationship, making it a win-win situation for both client and advisor.

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