Jay Shah: “Here Are 5 Things You Should Look For When Choosing a Financial Advisor”

Having a financial advisor doesn’t mean you don’t have to stay on top of your finances. Instead, think of it as a partnership. Ultimately, it’s important to own your future, because while an advisor can be there to guide your financial decisions, no one else can take full control for you.

I had the pleasure of interviewing Jay Shah. As founding executive member and current CEO of Personal Capital, Jay has shaped the pioneering digital wealth management company into what it is today. With more than 20 years of experience scaling businesses with technology and data, he has grown Personal Capital from a Silicon Valley startup to a tech-enabled advisory business managing more than $10 billion in assets. Prior to joining Personal Capital, Jay served as CIO of E-LOAN, Inc., a multi-billion dollar consumer lending platform, where he facilitated the company’s acquisition by Banco Popular and led the build-out of the consumer-direct banking platform. Earlier in his career, he served as CTO and CIO at Myers Internet, a B2B SaaS enterprise platform for mortgage and real estate companies, and as Director of Technology, National Risk Management Services at PwC, where he created a strategic software practice for the firm’s emerging consulting businesses. Shah currently serves as a director on the board of Personal Capital Corporation, and was Chairman of the Technical Advisory Board at Ellie Mae from 2014 to 2018. Shah earned his B.A. in Business Economics from UC Santa Barbara with a concentration in accounting.

Thank you so much for doing this with us, Jay! 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?

Doing the right thing and helping people have always been important to me. At an early age I started my first job in finance selling credit cards, I liked doing something that I thought was helping people get access to credit they needed. Soon I got promoted to the collections department, where I quickly realized I had participated in a system built to look helpful, but wasn’t really acting in the best interest of consumers at all. That didn’t feel very good.

Since then, I’ve made it my life’s work to build solutions that empower people to achieve their financial goals by showing them what many in the financial industry often try to hide. We started Personal Capital exiting the financial crisis in 2009, driven by our frustration with the lack of transparency in financial services and our mission to use technology and people to give consumers clarity into, and control over, their financial lives.

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?

Yes, I’m not sure it was a mistake, but it probably wasn’t the greatest idea. Back in the “dot com” era I was responsible for technology and operations at a fast growing provider of enterprise web solutions. Our company had an opportunity to resuscitate a defunct business from bankruptcy. We were super busy and no one could really take on more work so I volunteered to reroute the toll free support line to my cell phone — for literally hundreds of not so happy customers who had not been supported for a long time. It was very interesting to field calls from customers who had been trying to reach an unstaffed support department for months before I volunteered to take their calls. While some might have thought it a mistake to cover that grenade, I found it gratifying to be helpful. It was a great reminder to never forget the importance of staying connected to your customers. Literally!

Are you working on any exciting new projects now? How do you think that will help people?

We’re working on a lot of exciting things here at Personal Capital. And, honestly, all of our key projects start with the question “How can we make this better for people?” — so the core of everything we do is about helping people.

For example, we recently launched Savings Planner, a savings tool to help people plan for their annual retirement savings, an emergency fund, and pay down debt. We also launched Personal Capital Cash, a new high-yield account with aggregated FDIC insurance that covers balances up to $1.25 million. Cash has no minimums, unlimited number of withdrawals and mobile sign-up capability, all features we know consumers like. Because our users and clients shared with us that their uninvested cash wasn’t earning enough, we created this offering to help people accelerate their savings.

This is just one example of how Personal Capital combines qualitative feedback from the thousands of conversations our advisors have with people about their money every week and combines it with the quantitative data we see on our dashboard from the more than two million users of our free tools. This way, we’re able to get to the root of the financial problems people need help solving to reach their goals.

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?

My time at E-LOAN, where I was CIO, was a tipping point for me in that it showed me the power of technology to truly transform a consumer experience and bring transparency to an opaque marketplace. In that case, it was the providing consumer credit, and the company drove the ground-breaking legislation that allowed consumers to see their FICO score and understand their loan eligibility. It made no sense that people wouldn’t be able to have access to this important information about themselves, but that’s how it was at the time.

My main takeaway from that experience was how transparency and information can transform people’s lives. At Personal Capital, I spend most of my time thinking about the people we serve and how we can make their lives easier and better when it comes to their finances. This mission runs through product development, customer service and every facet of our organization. We’re creating tailored solutions and advocating for transparent, honest financial advice throughout the wealth management industry.

Not only does our customer-centric philosophy translate to financial success for our clients, it gives us peace of mind that we’re doing the right thing for all investors.

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. Know your strengths: True leaders know their strengths and weaknesses, lean in to what they’re good at, and surround themselves with others who complement those strengths. Some of my strengths include operational rigor, scale and process. Leaning into those passions was crucial in my journey to CEO.
2. Embrace your passion: Early on, I realized that I am deeply passionate about empowering people to achieve their financial goals. Seek out a role that resonates with your core and gets you fired up to hop out of bed. You should be eager and passionate about confronting your customers’ challenges with your fellow colleagues.
3. Find balance: With all the demands work brings, it can be hard to find time for your personal life. But if your family, friends, exercise routine, or whatever else keeps you balanced falls out of whack, the work part of the equation will also suffer. This is particularly important for leaders as we set the example and tone for others. Life is too short, so keep your balance and you will be happier, healthier and more effective in everything you do.

Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As “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?

1. Take control: First, I’d say congratulations — this is the first step in taking control of your financial life. I’d also remind them that having a financial advisor doesn’t mean you don’t have to stay on top of your finances. Instead, think of it as a partnership. Ultimately, it’s important to own your future, because while an advisor can be there to guide your financial decisions, no one else can take full control for you.
2. Work with a fiduciary: I believe that every financial advisor should be required to put their clients’ interests first. Unfortunately, this isn’t true of all advisors. It’s only true of fiduciaries. Other advisors may charge hidden fees or get paid by the funds they recommend, whether those funds are the best option for the client or not. The problem is that most people don’t know that all advisors are not alike. Personal Capital released a survey earlier this year that found nearly half of Americans (48%) mistakenly believe all financial advisors are required by law to always act in their clients’ best interests. This is a major myth in the industry. So, how can you find out if you advisor is a fiduciary? Just ask. If the answer is more complicated than a simple, “Yes, I’m a fiduciary,” walk away.
3. Ask about fees: It’s essential to ask an advisor about their fee structures upfront. According to our research, 61% of Americans do not know how much they pay in investment fees. These fees can add up significantly over time, and not all advisors are as upfront about what they charge. You wouldn’t shop at a grocery store or a car dealership that doesn’t tell you what their products cost, yet millions of people do this every day with financial advice. Again, if you’re not sure how your advisor makes money, ask. If the answer seems overly complicated, you may want to reconsider working with them.
4. Understand their investment strategy and why it’s right for you: Ask your financial advisor what his or her investment strategy is and most importantly, how it is customized for your specific needs. When it comes to retirement planning, one size does not fit all. Someone in their late 20s getting ready to buy their first home isn’t in the same boat as someone in their late 50s getting ready for retirement. Investment strategies should change over time as risk tolerance and life changes. Make sure your investment strategy is dynamic and you have an ongoing dialogue as your goals and financial situation change.
5. Check their credentials: Certifications and credentials are often good indicators of expertise and understanding. Investment professionals can go by many terms — financial advisor, financial consultant, financial planner — so it’s helpful to understand what designations and credentials they have. Common credentials are Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA) — we often recommend working with CFP® certificants, who are trained in advising on complex financial situations. Licensing exams are needed to give different types of advice. You can do a first screening on FINRA’s BrokerCheck, but make sure to ask if they’re certified or chartered, or which exams they have passed. Ask them why they are qualified to help you with your investments. At Personal Capital, our licensed advisors are SEC-registered investment advisors or CFPs.

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?

Making financial advice and insights available to more people is an important part of our mission, and we have over 2 million registered users of our tools. The majority of Americans don’t even have a financial plan, so if we can get them to simply take that first step, it can have a massive impact.

While everyone can benefit from financial advice, not everyone needs a full time financial advisor. For people just starting out, who have relatively straightforward financial situations, an advisor who works on an hourly basis may be fine. As things get more complicated — with kids, mortgages and 401(k)s — you’ll likely need more help.

Think about managing your money like taking care of a car. While most people regularly take care of their cars by pumping their own gas and putting air in their tires, for more complex tasks — such as checking brakes or changing spark plugs — they typically leave the heavy lifting to a trained expert.

The financial advisor’s job is to model good financial practices and assist their clients in an objective manner, providing guidance as needed. A big advantage is that a financial advisor can help people avoid emotional mistakes. When markets are booming, they will encourage you to rebalance and when markets are plummeting, they will help you keep an eye on your long-term goals, preventing you from panicking and making knee-jerk decisions.

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 couldn’t agree more that no matter how smart or skilled anyone may be, everyone needs help along the way. Apart from being incredibly appreciative for their ongoing support throughout my life, I’m grateful for one thing in particular that my parents did to help me find my own way very early on. They did something that I realize only now played a particularly large role in the person and professional I am today. Every summer while I was in grade school, they dropped me off by myself at the San Francisco airport and sent me off to Michigan to visit my relatives. It was intimidating at first but it soon became second nature. Making my way through a large airport, encountering strangers, switching planes at unfamiliar places shaped my confidence that I knew could get anywhere on my own. It’s something I can’t really imagine doing with my kids nowadays. But maybe I should. This ritual was one of the most formative things that built my foundation of confidence and independence.

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 would love to help more people achieve their financial goals — whether that’s living their retirement dreams, sending their kids to college, or buying a home. Doing that requires bringing transparency to financial services and changing the way the industry works. According to the Economic Policy Institute, retirement savers lose $17 billion annually acting on advice from financial advisers who have conflicts of interest — this simply can’t stand.

In a perfect world, Americans would know exactly what they’re getting from their financial services providers, how much they’re paying in fees on their investment accounts and would trust that their advisors are fiduciaries who put the client’s need over their own personal gain. I would love to spark a movement of consumers who demand better treatment from the financial services industry. We’re already seeing the early stages of this, and I hope the work we’re doing accelerates progress so all companies are forced to put the customer first. There is a ground swell forming and it’s gaining speed. The more consumers realize there’s a better way, there is nothing that will stop them from demanding the better outcomes they deserve.

How can our readers follow you on social media?

You can follow me and Personal Capital on Twitter at @JayShah_PC and @PersonalCapital and on Facebook at https://www.facebook.com/PersonalCapital/ or Instagram at @personal.capital We regularly update our blog with relevant advice and guidance at https://www.personalcapital.com/blog.

Thank you for all of these great insights!