Financial advice is everywhere, it can come from your friends, family, doctors, priests, a movie, a billboard, a TV show, literally anywhere. The first step to finding out if you have a trustworthy financial advisor is to recognize that financial advice is everywhere because once you realize this, you will be able to evaluate who’s advice you should be taking.
Once you recognize who’s advice you should be taking the next step is to evaluate their actual competency. Competency can be of two types, positional competency, and actual competency. Positional Competency is the competency you assign to a person based on the position they hold. Actual competency is the competency you assign to someone based on the actual results they produce. Take a successful entrepreneur who runs a car dealership, for example, they might be a very successful car dealer but are not necessarily good at investments, because their field of expertise lies in cars. You can trust business advice coming from such a person, but not necessarily when it comes to finances and investments. When looking at a person’s actual competency to give you financial advice you need to consider three things:
Their own achievements in this field: When someone is giving you advice on anything, you need to see what they have achieved in this field themselves. If you are seeking marriage advice, you would usually first approach someone who is married. Therefore, if you are seeking investment advice, you should approach someone who makes investments for themselves and others.
The results they have produced for others: When evaluating how competent someone is to provide you with financial advice it is always a good idea to check the results they have produced for others. This demonstrates that the advice not only worked for them but has also worked for their clients.
How up-to-date are they: When seeking financial advice, it is important to get your advice from someone who is aware of the current scenario in the market, as the financial market is a dynamic entity it keeps going through changes.
One of the most important things to determine is that if the financial advisor has any vested interests in providing you with financial advice. If they do have a vested interest you should see if they are competent enough to provide you with what you want. The ideal financial advisor will have no vested interest in your financial well-being, other than the fact that they want one more satisfied client.