In the past, the only way to learn more about financial advisors was to talk to them. They controlled all the information you relied on to make your all-important advisor selection decision.
Unfortunately, when contact was established, you may have been subjected to high-pressure sales tactics used by advisors, who relied on their sales skills to make a living. For this reason, a lot of investors who would benefit from the advice and services of high-quality advisors were reluctant to use them; they were afraid they would be sold bad advice and bad products.
Now, there is a better way. The Internet is the game-changer.
What High-Pressure Sales Tactics?
In the pre-Internet age, there was an overwhelming probability that the financial advisor who initiated contact with you used one of the following sales tactics: telemarketing, direct mail, free seminars, affinity marketing or referrals.
These tried-and-true sales processes had some unfortunate consequences for investors. The advisors most likely to contact them were the ones with the best—or at least the most aggressive—sales skills. High rejection rates didn’t bother them. Nor did the fact that investors did not want to be contacted. It was all a numbers game. They might call 100 investors to produce one prospect for their services. Or they could invite 100 investors to a free seminar and expect 10 to show up. All they needed was one sale to justify the time and expense.
The Friendly Referral
There was also Plan B for advisors—the referral game. What if someone you trust gives your name to a financial advisor? The referral source could be a friend, family member, associate or your CPA.
On the surface, this would appear to be the better way to find a financial advisor. You might assume that if the referral source had a positive experience with a particular advisor, then you will have a similar experience. But that presupposes that the source knows how to measure results, is not the advisor’s best friend and your future results will be the same as the referral source’s past results. These are dangerous assumptions.
How the Internet Changes the Game
The Internet puts the power back in your hands where it belongs for three reasons:
- You only need to enter few keywords in Google to find an advisor.
- You can access public data online for financial advisors.
- You maintain your anonymity until you are ready to talk.
The real power of the Internet is your access to information about financial advisors. You just have to know where to look.
The fast, easy source of information is the advisor’s website. You can tell a lot about a professional by the information that is and is not disclosed on the advisor’s website. For example, does the advisor disclose his or her credentials, ethical history, business and compensation practices? Or is the website just a colorful brochure that contains generic text and stock photos?
Google Name Search
What do you see if you Google the advisors’ names and their firms’ names? Do you see articles they have written? Do you find articles that have been written about them? Or do you simply find their social connections?
Salespeople rarely take the time to write articles. Most often, they lack the expertise to write the articles, or they just don’t view writing as a good use of their time. They’d rather be selling. Financial advisors, who are not skilled sales professionals, are more likely to write articles that establish them as credible experts. They’re often reaching out to more affluent, more sophisticated clients, and so they need to establish a depth and/or a breadth of knowledge that’s appropriate for the needs of a high net worth investor.
The Regulatory Agencies
There are four regulatory agencies that maintain data about financial advisors and sales representatives.
- FINRA.org’s BrokerCheck service publishes the compliance records of advisors and firms that hold active securities licenses.
- SEC.gov publishes the ADVs of Registered Investment Advisors
- Your state’s securities commissioner
- Your state’s insurance commissioner
Who Initiates Contact
There is one other core issue when you use the Internet to find and screen advisors. You get to be the one who initiates the contact.
In a recent Paladin survey, 71 percent of investors said they were reluctant to initiate contact with financial advisors because they did not want to be subjected to their high-pressure sales tactics. But if you need the services of a financial advisor, this is the lesser of two evils. There is a much higher probability that you will be subjected to aggressive sales tactics if advisors initiate contact with you.
The good news is, most of the best financial advisors do not use these tactics. In fact, there is a good chance they don’t even like the sales process. They are intellectual, quantitative and analytical by nature. These are the types of professionals you are looking for on the Internet.