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Taking Stock of Financial Advisors

Whether you tap into this year’s Top 20 Financial Advisors list or not, here are some things to look for when you choose someone to manage your nest egg. Whether you are looking for basic financial security or maybe a second home on the French Riviera, advisors today need a lot more in the tool box than a few hot stocks

When Keith Chock started his career as a financial planner in the late ’80s, the profession could nearly be summed up in one phrase: “What’s good?”

“When I started, the market was just going straight up, and people just wanted to make as much money as possible. And everybody was doing it. People were trading online. People were doing it in their living rooms,” says Chock, vice president, wealth management, for Smith Barney in Hawaii, and No. 19 on Hawaii’s Top 20 Financial Advisors list.

Chock remembers a television commercial about a guy at a copy machine who traded on the side and now owned his own yacht. “The message was, if he could do it, you could,” Chock says. In that climate, most of the time, the job of financial advisors was to answer that one question: “What’s good?”

Not anymore.

The stock market eventually crashed. Over the years, several bubbles have burst. People haven gotten more conservative. Horizons are longer. People today are living longer and they don’t want to outlive their savings. Plus, people’s financial lives are more complex. People are taking care of their parents longer or caring for grandchildren or paying for such things as the escalating cost of their children’s education. And people’s retirement aspirations are different today: People want to do things like travel the world or do humanitarian work in their increasingly vibrant twilight years.

And today, legal issues are more complex.

Tax issues are more complex.

The world is just more complex.

Says Diane Kimura, vice president and wealth-management advisor for Merrill Lynch in Hawaii, “When I first started I never would have thought to ask, ‘Do you have any children from a previous relationship? What is the state of your marriage? Are your parents still alive?’

“I think it is similar to when cars were first made. People had a choice of colors of the Model T. You could get black or black. Since then, you have a myriad of types of cars and colors. And even the types of fuel that they use. I think that is kind of reflective of the financial side of life,” says Kimura, who is the No. 15 advisor on the top advisors list.

In this “new world order,” as Kimura calls it, a financial advisor looks at a client’s total financial picture, which includes mortgages, insurance and major purchases. Kimura says the first thing she does with clients is sit down and discuss every aspect of their financial picture and hammer out exactly what their goals are for the future.

She compares not taking such a comprehensive approach to going to an airport for a trip, without a destination in mind, not knowing how you’re going to get there, how much it will cost, and just hoping it will work out. That is not to say a lot of people aren’t doing just that and landing in the wrong place with all the wrong things packed. “Two-thirds of the working population will retire with inadequate savings,” she says.

photo: Jimmy Forrest

People today need to have a sound financial plan, and a good financial advisor.

When asked for tips on finding a good advisor, R.J. Shook, author and founder of The Winner’s Circle, which compiles national and regional lists of top advisors, says that interest in and concern about his or her clients are two of the most important qualities of an advisor. In fact, when Shook and his team rank advisors, those are major components in the evaluation.

“If you find an advisor who talks about himself or herself all the time, that is probably an indication that they are more interested in themselves then you,” Shook says. “The great advisors always put their clients’ interests first and foremost and that is why they have built great businesses. They do what is right for their clients and their clients send them referrals.”

Shook says advisors are extending way beyond their traditional roles to make sure everything is coordinated for the best financial outcome. “They are acting as the quarterback. They are in touch with the CPAs, the attorneys, and if it is a company founder, they will be in touch with the CFO of the company, the insurance agency, whoever these professionals are in touch with, they pull it all together,” Shook says.

Shook adds that, at the top firms, this is increasingly being applied across the board, not just for ultra-wealthy clients.

Mike Strada, senior vice president of Morgan Stanley in Hawaii and the No. 1 financial advisor in Hawaii, says his approach is to try to really understand the ultimate goals and values of his client. Strada says he reads everything from The Economist to People magazine. The latter subscription, he says, is one his own CPA gives him a hard time about, but he wants to know what people are thinking and talking about. He has friends and acquaintances from all walks of life and he chats them up frequently to hear about what people value and desire and fear.

“It is about understanding what makes people tick,” Strada says.

That’s why, he says, Morgan Stanley hires people who have had some life experience, who understand what risk means and what is truly valuable to clients, because they have lived it.

Says Smith Barney’s Chock, “It sounds kind of corny, clients just want to know that you care. They come to us to solve their financial problems and we really do care about where they are, what they are doing, and we really do care about what concerns them.”

So Chock gets asked a lot more than just what’s hot today.

“One client called me up the other day and said, ‘I want to buy a coffee table, what should I do?’” Chock recounts. “It’s crazy, but that’s what we do. We are so heavily involved with our clients.”

The Man, The Methodology

R.J. Shook

When R.J. Shook graduated from Babson College in the late ’80s, he landed a job with Prudential-Bache Securities as a financial advisor. On his first day, they stuck him in a room with a phone and a phone book. “I had no idea what I was doing, I was 21, and they wanted me to manage people’s money, but first I had to convince people to give me their money,” Shook says.

Shook, the son of prolific author on business Robert L. Shook, decided he would write a book about what makes a great financial advisor. “I thought if I was dying for that information, someone else was, too,” Shook says. His first book turned into four books on financial advisors and now a company called The Winner’s Circle, which ranks financial planners all over the country, including a prestigious national list that has run the last three years in Barron’s.

How it works

To remain completely independent and objective, The Winner’s Circle does not receive compensation from financial advisors, the participating firms or its affiliates, or the media, in exchange for ranking. The ranking process begins with a survey of top securities firms, insurance companies, banks, independent financial advisory practices and other organizations that employ series-7 registered financial advisors; each of these firms must promote objective and independent advice with open-architecture access to financial products and services.

The rankings are based on qualitative criteria: professionals with a minimum of seven years financial services experience, acceptable compliance records, client retention reports and customer satisfaction reports. Advisors are quantitatively ranked based on varying types of revenues and assets advised by the financial professional, with weightings associated forÊeach.ÊAdditional qualitative measuresÊinclude: in-depth interviews and discussions with senior management, peers, and customers.ÊBecause individual client portfolio performance varies and is typically unaudited, this rankingÊfocuses on customer satisfaction and quality of advice.

Please see www.WCorg.com for more information.

Interested in participating in next year’s survey? Nominations for Hawaii’s top financial advisors for 2008 can be sent to hbeditorial@pacificbasin.net

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