“5 Things To Look For When Hiring a Financial Adviser”, with Patrick Huey & Tyler Gallagher
Find a life-long learner who will grow with you over time and proactively shares what he or she learns. Scrolling down an advisor’s LinkedIn profile should give you an idea of their educational background, but some follow up questions can help discover personal learning objectives. Is he a lifelong learner who will bring you along for the ride? Or is he living in the past with nothing new to offer? It may sound obvious, but in a dynamic industry, someone with the dedication to improving his craft is always preferable.
As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing Patrick Huey. Patrick Huey is a Financial Planner an Accredited Tax Preparer, a CERTIFIED FINANCIAL PLANNER™. He is also a Chartered Advisor in Philanthropy® and holds a Master of Business Administration from Arizona State University. Patrick is the owner of Victory Independent Planning, LLC., the author of History Lessons for the Modern Investor and The Seven Pillars of (Financial) Wisdom. He served as a Naval Flight Officer from 1996–2005 earning the Strike Fighter Air Medal during combat operations and two Navy Achievement Medals. He lives with his wife and young son, splitting time between the Pacific Northwest and Southwestern Florida.
Thank you so much for doing this with us! Our readers would love to ‘get to know you’ a bit more. Can you tell us a story about what brought you to this specific career path?
In a word, mistakes brought me to this career path. I was a young Naval officer without any financial training during the late 90s and early 2000s. I made enough money to save and invest, but I also made every silly mistake you could, buying high flying tech stocks, ignoring diversification, and panic selling when things eventually cratered. I speak so passionately now about mastering the basics of finances and cognitive biases because I made the errors myself due to my own ignorance. I wanted to be smarter about how I spent, saved and invested my money. I liked the process enough to forego what I thought would be my career path, as a teacher. I left my Masters in Education program before finishing, got my Masters in Business Administration instead and earned my designation as a Certified Financial PlannerTM. In a way though, I am teaching again today, but the ‘classroom’ is most often at my client’s dining room table.
Can you share a story about the most humorous mistake you made when you were first starting in the industry? Can you tell us what lesson or takeaway you learned from that?
I took the first job I was offered in the industry without really understanding the culture I was getting in to. I ended up as the junior broker in a large securities firm with a sales first culture; there were the rain makers in corner offices and there were the rest of us in an open office space cold calling people are dinner pitching mutual funds. One day, I got called in to the branch manager’s office because he supposedly wanted to meet me. He asked some polite questions from behind his polished mahogany desk about my past, my career in the Navy and what it was like to fly the F-14 Tomcat. At the end, he handed me his wastebasket and asked me to go empty it in the trash chute. Imagine it, two weeks after my last flight in a seventy-five-million-dollar jet fighter, some suit in the corner office is telling me to empty his waste basket. It is funny to me now, a total power play move, telling me that I may have been a hot shot Naval Flight Officer, but that was over, and I was in his world now. I suppose he was right, but I knew at that minute that cultures like that didn’t share my values. I emptied the trash (once), stuck it out for a year and went to work for a Registered Investment Advisor. I haven’t made a cold call since. And I take out my own trash.
Are you working on any exciting new projects now? How do you think that will help people?
I’m working on another book (I’ve published two so far), titled Achieving Victory that will be more specific to retirement and the needs of the mass affluent investor. I’m also experimenting with different formats of educational videos including cartoons, whiteboard videos and documentaries to teach my current clients concepts about investing, economics and capital markets. All of these initiatives are intended to provide regular people the clarity and confidence to enjoy fulfilling financial lives.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Is there a takeaway or lesson that others can learn from that?
True success for me really only came when I started my own firm three years ago. I had a good career up to that point, working and learning from smart people and then guiding my own group of clients on their retirement and investing journeys. But I never had full control of the client experience. There was always some bottleneck or executive decision that kept me from doing the things I wanted to do with and for my clients. A good example is tax planning and preparation. A large firm is terrified of giving tax advice for fear of the liability. But my clientele has a very specific need to include tax in their financial plans. I would often ask myself what all that tax training was for to get my CFP® designation if I wasn’t going to use it? Owning my own firm has allowed me to deliver advice across all five money activities in which clients engage: spending, savings, taxes, investing and gifting. The learning point is to know what success looks like to you. Is it money? A certain number of clients? Or controlling your process?
What three pieces of advice would you give to your colleagues in the finance field to thrive and avoid burnout? Can you give a story or example?
1. Right size. Know what your level of service will be and plan your business accordingly. Don’t expect to be a high-touch, personally involved advisor for 1,000 clients. It isn’t sustainable and your clients will be the first ones to tell you that. I was in that position, with over 1,200 clients and service team of four people. But I wasn’t growing my offerings or relationships with my best clients, I was just constantly taking on new ones. I was in a meeting with a great client with whom I had a personal relationship and I couldn’t remember his son’s name. It totally slipped my mind. I knew that wasn’t what I wanted for myself or my clients. I knew it was time for a change.
2. Plan for your clients lives and yours. Make yourself a client and understand your own values, vision and goals. This is essential to creating the life and business you desire. I was at a conference recently where a presenter stated that about half of financial planners don’t have a business plan for themselves. That is crazy. If you don’t plan for an outcome, be it retirement, business growth or work/life balance, it isn’t going to happen by accident. We should know better!
3. Find and create efficiencies: My clients are amazed that my response times have decreased and my proactive contact has increased over the years. But that is by design. I actively look for ways to tweak my service models and contact schedules to make it easier for me to deliver on a key part of my value proposition.
Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As an “finance insider”, you know much more about the finance industry than most consumers. If your loved one wanted to hire a financial advisor (not you :-)), which 5 things would you advise them to find out about before committing? Can you give an example or story for each?
· Seek an advisor whose designations don’t just sound impressive, but actually fit with your needs. The proliferation of letters after an advisor’s name leads to more confusion among consumers, so while designations may aid in determining expertise, merely looking for letters after an advisor’s name isn’t sufficient. Such designations are more likely than ever to reflect specific niches of expertise that may or may not match well with a prospective client’s actual needs. They may indicate specific proficiency in areas such as life insurance or mutual funds, but may be of little value to someone who needs a retirement plan and help with spending and taxes. A successful relationship will require you to ascertain if the advisor has the right kind of expertise to help your financial situation and if the designation she holds will be worthwhile to you.
· Find a life-long learner who will grow with you over time and proactively shares what he or she learns. Scrolling down an advisor’s LinkedIn profile should give you an idea of their educational background, but some follow up questions can help discover personal learning objectives. Is he a lifelong learner who will bring you along for the ride? Or is he living in the past with nothing new to offer? It may sound obvious, but in a dynamic industry, someone with the dedication to improving his craft is always preferable.
· Assess the emotional quotient (EQ) of your potential advisor to uncover the right motivations as a steward, not a salesperson. The awareness of emotions and ability to help clients begin to manage them moves beyond a sales relationship.
· Salespeople take advantage of emotions such as fear to create the action that leads to a sale. Stewards recognize, empathize with and evaluate emotional responses, using them as teaching moments and in most cases preventing actions that are detrimental to long term success.
· Those that spend more time asking questions about your expectations, fears and potential emotional triggers are more likely to spend enough time to move into a stewardship role. They will ask open ended, occasionally uncomfortable, questions about vision and values instead of seeking a pain point and then offering a product to “solve” the problem.
· Sales people need to get to a product pitch and tend to dominate a conversation. A good steward shares the conversation effortlessly.
· Sales people sell fear. Stewards point out risks and seek ways to minimize them while acknowledging the uncertainty of life.
· Sales people tend to thrive on chaos and it will show in everything from the office space to how she conducts a meeting. A steward has organization skills that minimize daily stressors and a work environment that is organized and efficient.
· Sales people tend to have a single option that they pitch over and over again. A steward continually refines his practice by educating himself, staying up to date on trends and making changes when necessary.
· Utilize the Greek alphabet (Alpha, Beta, Gamma & Zeta) to determine and evaluate the true value proposition of an advisor. Which of these is the primary driver of the value you will get from the relationship? Is it consistent and repeatable?
· Alpha is purely a measurement of investment return. Is your advisor getting you a better return than you would get buying an index fund? The answer, research shows us, is usually no.
· Beta is a measurement of risk in comparison to the broad market. Even if your advisor has solved the issue of generating Alpha (a big assumption), you still have to question the amount of risk she is taking. If it is a lot more than the broad market to get a marginally better return, you are likely to give back most of the value earned when the market turns against you.
· Gamma (also known as Advisor Alpha) is a measurement of the value advisors can add by engaging in activities like coaching, planning and tax efficient investing. Advisors are now expected to do much more than just choose suitable investments. The value added through these activities varies, but researches like Morningstar and Vanguard have attempted to quantify their potential impact.
· Zeta is the value of advice in reducing the amount lost in negative markets. Measuring the effect of advice from 2007 to 2009, researchers found that those who engaged an adviser lost wealth, but they lost proportionately less than those who didn’t.
· Identify and avoid self-orientation, identifying those who are trustworthy using a relatively simple formula. Author Charles H. Green offers what he calls the ‘trust equation’ where trust is equal to credibility, reliability and intimacy divided by self-orientation. You have to add all of the valuable information gained in the first four questions and “divide” by the self-orientation of the advisor. By the formula, the more self-oriented someone is, the lower the trust you should place in them even if they score well on other items. Talking more than listening indicates a degree of self-absorption. Being nervous or distracted indicates self-consciousness. Bluster and talk of achievement instead of your goals indicates self-aggrandizement. Self-absorbed, self-conscious or self-aggrandizing are all descriptors that start with the word self, and therefore indicate a high degree of self-orientation.
I think most people think that financial advisors are for very wealthy people. This is likely not actually true. Can you explain who would most benefit from hiring a financial advisor and why? Can you give an example?
Actually, the mass affluent can benefit much more than the wealthy from an advisory relationship because their margin for error is usually smaller. A client with a $500,000 IRA and $500,000 home value is a millionaire on paper, but he or she shouldn’t be living a ‘millionaire lifestyle’, at least as we have come to think of it. She needs guidance on spending, savings, taxes and investing to make sure she has enough to fund retirement, put her kids through college and have minimal risk of running out of money. These also tend to be salt of the earth folks who want to give back in some way. Coordinating all of their money activities can be the difference between leaving money to their children in their will or moving back in with them later in life because they have depleted their funds.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I met a gentleman named Colin Williams (I’d rather not state the firm he is with), a managing partner with a wealth advisory firm while I was trying to figure out how to start my own shop. I had some cursory conversations about joining his firm, and though they were all wonderful people, it wasn’t really what I wanted to do. I felt like I wanted to give my own brand and ideas a try first. Colin was a true professional. He didn’t try to wedge me into a situation where I wasn’t going to be happy. Instead he paired me up with a contact he had met at a conference a few weeks before who turned out to have the exact model I needed. He didn’t have to do that. It told me a lot about his character and dedication to helping people. He is that kind of person. This profession needs more people like him.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I think I would want to popularize a movement to get people to better understand how their brains work and don’t work. We put way too much stock in our perceived abilities to engage in critical thought and process information. As the speed of life increases, we are still relying on pre-historic impulses to guide us, which is turning out to be extremely polarizing and potentially dangerous to our finances and our happiness.
How can our readers follow you on social media?
Thank you so much for joining us. This was very inspirational.