{"id":8659,"date":"2017-09-28T15:24:03","date_gmt":"2017-09-28T19:24:03","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=8659"},"modified":"2025-05-08T03:02:26","modified_gmt":"2025-05-08T07:02:26","slug":"have-you-seen-your-financial-advisors-performance-results","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/advisors\/have-you-seen-your-financial-advisors-performance-results\/","title":{"rendered":"Have You Seen Your Financial Advisor\u2019s Performance Results?"},"content":{"rendered":"\n

Merriam Webster<\/a><\/span><\/strong> defines the word \u201cverify\u201d to mean \u201cto establish the truth, accuracy, and reality of\u201d a claim or situation. When it comes to choosing someone to make decisions with your money, nothing serves as better verification of ability than the truth about a financial advisor’s past performance. Then why don\u2019t more investors ask to see a track record? If you\u2019re in the market for a financial advisor<\/a><\/span><\/strong>, ask these 3 questions to make sure that he or she truly does possess the level of skill needed to manage your portfolio successfully.<\/p>\n\n\n\n

1. Can you provide me with your 10 year track record in writing<\/strong>?<\/h3>\n\n\n\n

Many advisors will say<\/em> they\u2019ve created good results, but when it comes to the \u201cshow me the numbers\u201d moment, they can\u2019t produce any concrete evidence in writing<\/em>.<\/p>\n\n\n\n

How long does the track record need to be?<\/strong><\/em><\/p>\n\n\n\n

Because of the cyclical nature of the economy and the market, you should only consider advisors with track records of 10 years or longer. Usually over the span of a decade there is a downturn of some sort which can show how the manager performs in such an environment. A track record shorter than 10 years is just not revealing enough \u2013 luck may have been the driving factor rather than skill.<\/p>\n\n\n\n

Advisors build financial plans and invest your portfolio accordingly. In cases where portfolios are customized for each client, advisors will say that there is no track record because each portfolio is different. For example, the investments for a 35 year old are likely to be more aggressive than those for an 80 year-old couple. The portfolios are going to be invested differently — but nonetheless, there should be a track record for each type.<\/p>\n\n\n\n

The bottom line is that any time an advisor claims to be making an investment decision –whether it is choosing ETFs, mutual funds, or stocks–the numbers matter. An investor should know how well the advisor\u2019s decisions, whatever they may be, have performed in the past.<\/p>\n\n\n\n

Fees for an advisor with a track record may potentially be higher than for an advisor without one. In these cases the higher fee is likely to be warranted, depending on performance. If you needed heart surgery, would you find the cheapest surgeon? Or would you pay a higher price for the one that gave you the most peace of mind?<\/p>\n\n\n\n

A lack of track record works against the interests of investors. How do you trust an advisor who can not document his or her results? The only way to know the truth and to keep the advisor accountable is to see the track record in writing.<\/p>\n\n\n\n

2. Is your track record GIPS verified?<\/h3>\n\n\n\n

Performance guidelines can get pretty technical. If you\u2019re not a financial professional, how do you know that the standards by which the track record is judged are truly fair and objective?<\/p>\n\n\n\n

Behold the Global Investment Performance Standards (GIPS<\/a><\/span><\/strong>). GIPS are produced by the CFA Institute, a non-profit investment management association that is not affiliated with any money management firm.  The GIPS are written in plain language that is understandable to a non-financial professional.<\/p>\n\n\n\n

You can see a list of all firms claiming compliance with GIPS here<\/a><\/span><\/strong>. Check this website for confirmation when speaking with any financial advisor who says that he or she follows these standards. All the top advisors and money managers are on this list.<\/p>\n\n\n\n

A GIPS compliant firm won\u2019t be able to engage in performance-inflating practices such as:<\/p>\n\n\n\n