How to attract a great advisor


A financial advisor’s job is to develop a plan and help you implement that plan over many years, so that you achieve your financial and lifestyle goals. This includes navigating the inevitable changes in your circumstances, markets, investments and so forth – knowing when to stick to the plan and when to alter it.

Achieving your financial and lifestyle goals is an incredibly valuable outcome. Therefore, it is very likely that financial advisory fees will be a small fraction of that value.

Just like in any profession, the best people are typically in high demand. Of course, when selecting an advisor, you definitely want the best that you can afford.  

Shrinking pool of financial advisors

According to research house, Rainmaker, approximately 30% (9,000) of financial advisors have left the industry since 2018. There are now less than 20,000 financial advisors in Australia.

There have been lots of legislative changes over this time that have prompted financial advisors to change careers or retire, including the banning of commissions, mandatory tertiary education standards(all financial advisors must pass a mandatory exam before 1 January 2022), increasing insurance costs and ever-increasing compliance obligations and so on.

The changes that have been implemented over the past few years have contributed towards lifting the bar (professionalism) for financial advisors. Of course, this is a good thing for the industry and its clients. But the result is that there is a growing shortage of financial advisors in Australia.

It’s the person, not that business that matters

A financial advisor and their client have a very personal relationship. This relationship is based on a high level of trust. Therefore, it is critical that clients find an advisor they feel comfortable with. Of course, there’s a personal/emotional element to this.

Second to trust is experience. Whilst it is possible to systemise some facets of the advice formulation process, what cannot be systemised or automated is experience. Experience is one of the most important and valuable benefits a financial advisor must share with you. Knowledge tells you what to do and experience tells you when and how to execute. The challenge is that experience isn’t scalable. There are no shortcuts to accumulating experience either.

An advisor that has been practising for 20 years is almost always going to be more valuable than an advisor with 2 years of experience.

Good advisors are rarer than good clients

There’s a limit to the number of clients that any one financial advisor can look after. Usually, that limit is in the range of 100 to 200 clients. But, of course, it depends on the complexity of each client.

It is very important for an advisor to choose their clients carefully. Of course there are some obvious commercial reasons for this, but I feel the most important consideration relates to the allocation of the scarcest resource; time. There’s a limited amount of time to share with a limited amount of clients, so it’s important that we share our time with clients that could benefit the most.

The only reason I come to work each day is the personal satisfaction I receive from helping my clients. Therefore, if I work with clients that truly need my help, I maximise this satisfaction. It might seem altruistic, but the truth is that it is a selfish pursuit. Thankfully, my client and my interests are perfectly aligned.

I don’t think I’m the only financial advisor that thinks this way. In fact, I’m sure most in-demand advisors think this way. The advantage of having an almost abundant supply of potential clients is that you can be selective. It allows you to pick the clients that you can add the most value to.

Scope to add value

How much scope there is for a financial advisor to add value depends mostly on your financial circumstances. Factors such as the quantum of investable cash flow, value and type of existing investments and complexity are often the most important considerations.

In addition to adding value, an advisor needs to consider whether they will enjoy working with the client over many years. This can include things such as:

  • Willingness to follow advice – what is the point of paying for advice if you aren’t going to follow it. That’s just a waste of your money and the advisor’s time.
  • Clients are enjoyable to work with when they are modest and appreciate your time, care and advice.
  • Clients recognise that you are the expert. They delegate the task of building wealth to their advisor and trust in the process.

Don’t underestimate the cost of advice

Ben Graham taught Warren Buffett that; price is what you pay; value is what you get.

You cannot judge a product or service on price alone, as its only one half of the equation. It’s not difficult to conceive that financial advice can be incredibly valuable i.e. quality financial advice can create several millions of dollars of value over long periods of time. It is sensible to consider that when weighing up an advisor’s fees.

Firstly, you must consider the amount of experience an advisor has. An advisor that has many decades of experience is going to value their time at more than a couple of hundred dollars per hour.

Secondly, you must appreciate that advice costs money to deliver. That includes all the compliance obligations, cost of education and keeping up to date, taking on the liability for providing advice and so forth.  

It is worth noting that paying high fees does not guarantee good results either. In fact, paying high fees for a poor outcome is a double whammy. Avoid percentage-based arrangements. Go for a fixed fee arrangement that is based on the time and complexity involved.

Great financial advisors are rare

Unfortunately, great financial advisors are rare. Lots of people have left the industry over recent years. And it’s not like you can increase the supply of experienced advisors overnight. This means that it makes it harder for people to find a good advisor. My tips for finding a great advisor include:

  • Get a referral from someone that has worked with an advisor to build wealth.
  • Every advisor should be able to articulate their investment philosophy and approach. And of course it will sound convincing. But you must see evidence that it works (including benchmarking of returns). I can’t understand why anyone wouldn’t use an evidence-based approach.
  • Ensure the adviser has extensive experience across all asset classes, especially property and shares. They should be investors themselves i.e. eat their own cooking.
  • Realise that you might need to wait. Busy financial advisors typically have client waiting lists.