Choosing a Financial Advisor

3 advisor-client models: Which is best for you?

By Marc Lewyn   |   September 16, 2009

If you’re choosing a financial advisor, you don’t want just anyone. Your goal is to find a GREAT financial advisor. And naturally, there are basic characteristics that you should expect in the financial advisor you choose:

  • Honesty
  • Empathy
  • Competence
  • Experience
  • Appropriately qualified
  • Is willing to be your advocate at all times.

How do people typically find a financial advisor?

They typically start by asking their network of family and friends, peers, colleagues and business partners. They may also search online, review a lot of websites, narrow the list and then interviewing an advisor or team. Most people use their instincts and investing knowledge to conclude whether a financial advisor can do a great job.

However, many people don’t fully realize that their personal relationship with their financial advisor can vary significantly based on the model that advisor uses. To develop a long term, successful and rewarding partnership with a financial advisor, you should delve deeper into the motivations and expectations on both sides. Depending on your stage in life, your circumstances, and level of wealth, a particular type of relationship may be most appealing to you.

There are three different financial advisory models with fundamental differences in the way the advisor-client relationship is structured:

Financial Advisor-Client Relationship Models*

ADVISORY APPROACH / MODEL
SALES MODEL
ADVICE MODEL
PARTNER MODEL
Investments

Sells you a great product

Informs you about attributes of particular investments

Listens & focuses on your desires and needs before recommending

Process

TACTICAL:
Provides buy & sell recommendations

COMPREHENSIVE:
Provides planning, investment management services

STRATEGIC:
Defines priorities and executes the best-fit solution

Financial planning

 Has a specific proposition

 Has a planning process

 Has a turnkey system to create opportunities

Focus

SHORT-TERM

ANNUAL

LIFETIME

Style

FEAR-BASED:
Points out the big mistakes you may be making; advises on tactics and tools

OPTIONS-BASED:
Provides you with multiple options to achieve your goals

VISION-BASED:
Inspires you to define your overarching mission and vision

Insights

 Limited insights

 Shares personal insights

 Helps you gain insights

Compensation

TRANSACTION-ORIENTED:
Trades value for commission

FEE-ORIENTED:
Paid a fixed amount per plan or work

RELATIONSHIP-ORIENTED:
Paid for wisdom

Approach

 Individualistic

 Delegates work to experts

 Lead an integrated team

Overall relationship

One-dimensional:
product-oriented

Two-dimensional:
service & process oriented

 Multidimensional and intimate

Communication

Informational, sales-focused

Consultative

Promotes reflection & results

Where might you find each financial advisory model in the marketplace?

  • The typical insurance broker or stockbroker uses the SALES MODEL.
  • The ADVICE MODEL is usually the forte’ of smaller, independent, fee-based advisory firms.
  • The emerging PARTNER MODEL is harder to find: It’s estimated that fewer than 100 firms in the U.S. fit this definition today.

If you’re choosing a financial advisor, which model is the best fit for you? I hope this article has helped. If you’d like to talk, I welcome you to contact us here.


*The structure and contents of this article are built upon the foundation of “advisor styles grid”  by T. Fithian & S. Fithian. 2007. “The Right Side of the Table”. Special thanks to Todd Fithian, CEO of The Legacy Companies, Boston who has generously granted permission to use his work for this article.

Marc Lewyn

About the Author

Marc Lewyn is a partner, senior financial advisor, and CEO of Strategic Liquidity Services ("SLS") at JOYN. SLS provides a methodology designed to help business owners navigate the complex options available for generating liquidity from their businesses. Marc also hosts “Diversify Your Wealth Beyond Your Business,” a “Ted Talk” style workshop for Atlanta business owners. Learn more / RSVP here.

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