Forbes recently published a report sponsored by Charles Schwab which found that the more financially knowledgeable you are, the more likely you are to be happy with your financial adviser. This may be because there are so many different types of financial adviser that only financially savvy investors are able to pick the one that will suit them..

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The report surveyed 300 investors and found that three quarters of them could not distinguish between the different kinds of financial adviser, including financial planners, investment advisers and so on. Nearly a third didn’t know how they were being charged for their adviser’s services.

So what’s to be done? If you are one of the people who feels uncomfortable about their lack of knowledge in this field, you may be interested in the approach taken by the report. It identifies three types of investors with varying levels of financial understanding: novices, apprentices and experts. The report analyses the difference between these three levels and set out the stages involved in moving from one level of expertise to another.

Novice, Apprentice or Expert – Which are You?

Novices are unclear what kind of fees they are going to be charged by their advisor, and don’t know whether the advisor is a “fiduciary” – that is someone who is bound to act in their best interests. Novices have a limited knowledge of the different kinds of advisor.

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Apprentices are a bit better informed. They still don’t know the difference between different kinds of advisors but at least they know what they’re being charged and are also aware of whether or not their advisor is a fiduciary.

Experts, as you might expect, are able to distinguish between different types of financial adviser, are aware of who charges for advice and why, know which services they’re being charged for and also know whether their advisor is a fiduciary.

However, it’s only a matter of time before back office systems for IFAs such as those from can recognise customers as falling into these types.

How to Become an Expert Investor

This boils down to:

Knowing your goals
Asking around and getting information from your network of friends and family, then doing your own due diligence before you appoint the advisor
Making sure that you understand the advisor’s charging structure
Communicating often with your chosen advisor.


About The Author

Donn Schlosser