Does your advisor have the same real-life experience as you?
Have you ever considered the difference between knowledge and experience? When we hire professionals, most of us check certifications and other indicators of knowledge. What makes us even more comfortable when we select a professional advisor is knowing that they have experience with clients just like us.
Further, if those advisors have been through the same experiences we are going through, the advice may be even more valuable. That “real world experience” can make a great professional even better.
Certainly, advisors should be knowledgeable when it comes to giving investment advice—at least you hope they are. And, in many cases, advisors present their personal investment theories as the tool that separates them from the rest. But what should really separate them is their ability to apply their experience to your situation. As Ralph Waldo Emerson once said, “Life is a succession of lessons which must be lived to be understood.”
Take the act of selling a business. The event is one of the most challenging and difficult times for a business owner. Indeed, most owners have spent their entire lives building their businesses, and this impressive feat is what defines them as people.
If your advisor hasn’t lived through what you are going through, can he or she really understand the issues you may be facing?
Giving up a business can be difficult, and in fact is one of the hardest decisions owners will make in their lives. There are also a lot of considerations to be considered before making the formal decision to sell. In fact, the tax, financial and legal issues may be the easy part. The emotional issues can make the transition difficult or fantastic— depending on the preparation your advisor leads you through.
Additionally, consider that many advisors only want more money to manage and that this conflict of interest could be the cause of less-than-perfect advice. For instance, a person who has experienced the sale of a business can offer you advice to help you make the right decisions about whom you are selling or giving the business to. He or she can assist with making sure that your estate is in good order, so you can lessen potential capital gains taxation on the business. And, most important, an advisor with experience can provide counsel and be there for you and your family as you make what may be a difficult decision.
Here at IFAM, we have firsthand experience with the highs and lows that accompany launching, running and selling a business; several members of our management team are former business owners themselves. We encourage all investors to find just such an advisor with real-life experiences, who works on a flat-fee basis so that his or her advice does not represent a conflict and will be useful to the client. So, ask your advisor about his or her experience. Ask for references from cases like yours. Then check them out.
At IFAM Capital, we call money management the “beta” of our firm, but the “alpha” is our real-life experience and skill at understanding the problems that clients face.
IFAM is a Federally Registered Investment Advisor with its compliance office at IFM Capital, 4102 S. Timberline Rd., Fort Collins, CO 80525. Phone 970.530.5033. If you would like a copy of our ADV and client disclosure brochure, please contact this office. The data used for the performance calculations was obtained from sources deemed reliable, and then organized by the staff at IFAM Capital. We believe the data provided to be accurate but cannot guarantee it. The results shown should not be considered to be indicators of future performance. IFAM Capital does not assure that IFAM Capital’s performance will be favorable or that our strategies will work under changing market and economic conditions. Significant losses may occur in your account. Fidelity Investments is an independent company, unaffiliated with Institutional and Family Asset Management, LLC. Fidelity Investments is a service provider to Institutional and Family Asset Management, LLC. There is no form of legal partnership, agency affiliation or similar relationship between your financial advisor and Fidelity Investments, nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by Institutional and Family Asset Management, LLC, and does not guarantee, or assume any responsibility for its content. Fidelity Investments is a registered service mark of FMR LLC. Clearing, custody or other brokerage services may be provided by National Financial Services LLC or Fidelity Brokerage Services LLC.
This article was originally published in the February/March 2016 issue of Worth.