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We Are Working with a Financial Adviser

Posted By Jim On 02/18/2013 @ 7:10 am In Personal Finance | 11 Comments

Over the last year, we’ve made some “direct” investments in companies that are doing some exciting things. They’re startups, in the sense that they’re not household names and they’re relatively new companies looking to make big changes in their respective industries, but these aren’t the familiar technology names you hear about in the news. These are companies looking to solve problems, usually boring problems in big industries, but problems nonetheless.

These opportunities were brought to us by a financial adviser who, in addition to advising, also sets up funds that offer these unique investment opportunities. I know this sounds a little vague, I’m intentionally being vague, but after some due diligence we’ve decided to work with her as our financial adviser and I want to write about the entire experience in the hopes that it helps you in case you are thinking about working with an adviser.

Why a Financial Adviser

The first question off the bat should be – do I need a financial adviser? I’m by no means a financial expert, even though I write about it all day on the Internet (that’s qualifies me right???), and I recognize that. I see working with a financial adviser much like working with a personal trainer. Everyone knows that you have to get at least twenty minutes of aerobic activity three times a week and the key to building muscle is repeatedly picking up and putting down heavy things. A personal trainer provides a process and a sense of accountability. They also are more experienced, having worked with many other people and their specific situations and scenarios, to be able to help in specific situations.

For example, until I met with her, I didn’t think all that much about umbrella insurance [3]. She made a compelling case for it and why we might want to consider it but she wasn’t selling it. She just suggested we look into it. I wasn’t averse to umbrella insurance, it was just in a blind spot. Next on the list is probably a will.

Due Diligence

Due diligence took on three parts. First, I wanted to understand what my adviser would be doing in terms of process and approach. This was something you can only learn by talking to them and asking the right questions. What are the right questions? To be honest, I didn’t bring a list of questions but my wife and I met with her for an official “first meeting” (I’d met with her numerous times to talk about business and about direct investments, but not really as an adviser) and we left with a good understanding of her approach and how we’d work together. (And she’s fee only, though if we do invest using her firm’s funds she will receive a share of those fees too but investing in those funds is not required)

Next, I wanted some references and she provided an ample supply of them. I always think references are a little strange because as the person offering up references, you always provide the good ones right? Anyway, I talked with almost all of them and was left with a sense they were all happy with working with her. We found references that were in similar life stages and those with similar assets, just to get a good mix.

Finally, I did the basic stuff like confirming her credentials were true. I found her without incident looking her up on FINRA’s Broker Check [4] and the CFA Institute’s Membership Directory [5]. In doing so, I learned that she’s also has a J.D. from Harvard, a B.A. from Stanford and while I don’t know many advisers, it sounds like she’s pretty well credentialed.

Special Investments

In talking with one of the references, I learned that one of his primary motivators matched mine – the special investments. To be clear, these are risky deals because there is zero diversification. We’re essentially lending money to a company in the hopes they pay back the loan at a certain interest rate. The companies are real (I visited one two weeks ago) and this isn’t some Ponzi scheme situation (it helps that my friend’s dad is an engineering consultant to the company… same friend who introduced me to the adviser), but you never know.

Networking Opportunities

Finally, and this is not an insignificant consideration, she’s very well connected through her own work and she’s very entrepreneurial, which gives us a lot to talk about outside of the cut and dry financial stuff. While I wouldn’t necessarily need to hire her or her firm as an adviser to continue this, I do like the idea of expanding the relationship because I think it’ll be mutually beneficial down the road.

We’ll see how this goes and as we proceed, I’ll be posting updates as to what we are doing so you all can follow along at home. I don’t know why but it suddenly feels very “adult” to be going down this path. Sometimes I think I have a tendency to want to “do it yourself” on everything, not so much to save money but to fully understand it, but just one look to a recent dry wall patch job shows that maybe DIY isn’t the best course for everything.

If you’ve had experiences with a financial adviser and would love to share your experiences, I’d love to hear about it.

(Photo: Daniel Y. Go [6])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/working-financial-adviser.html

[3] umbrella insurance: http://www.bargaineering.com/articles/finally-umbrella-insurance-policy.html

[4] FINRA’s Broker Check: http://brokercheck.finra.org/Search/Search.aspx

[5] CFA Institute’s Membership Directory: http://www.cfainstitute.org/about/membership/directory/Pages/index.aspx

[6] Daniel Y. Go: http://www.flickr.com/photos/84172943@N00/5242603576/

Thank you for reading!