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Qualifications of a Financial Advisor | CoreStates Capital Advisors

Qualifications of a Financial Advisor


CoreStates…Protecting and Preserving Lifestyles and Legacies

What qualifications should you look for in a financial advisor?

Your most important investment decision may be to whom you entrust the stewardship of your family’s wealth. Most likely, your investment portfolio represents many years of toil, discipline, and good fortune. It embodies the harvests of days past and forms the foundation of your family’s future.

If you do not have the expertise, the time and the desire to manage your investment portfolio yourself, the most important investment decision you may ever make is your selection of who you will work with to manage your portfolio for you. Your choice of a steward for your family’s hopes and dreams is an undertaking best not entered into lightly or casually.

Global perspective

Managing an investment portfolio effectively is more challenging than ever. The United States no longer dominates the world economy. Over the past five years, the dollar has lost substantial value against other major currencies and is no longer the premier international currency of trade. Growing demand for and dwindling supplies of energy and other resources has put considerable upward pressure on commodities prices, which can’t help but restrain the future growth of world economies.

To be effective today and into the future, a portfolio manager must have a global perspective — one that takes into account political trends and technological developments that can affect the growth of economies, the profitability of companies, the prices of commodities, and the strengths of currencies.

Attention to purchasing power

The decline of the dollar against other currencies erodes your wealth’s purchasing power. It fosters further inflation within U.S. economy. Your portfolio manager must seek to protect your wealth against such purchasing power erosion.

Mature market perspective and objectivity

The world’s financial markets are growing more interconnected daily. But, they are still driven day-by-day by participants’ expectations about the future. Any event or development that affects people’s expectations will affect market prices.

To be effective, a portfolio manager must be able to differentiate between market “noise” and truly important, long-term economic trends. He or she also needs the objectivity to see the investment possibilities of new technologies as well as to recognize that, when something appears too good to be true, it probably is.

Wisdom beyond the conventional

Some financial advisers claim that the investment markets are “efficient” – they immediately and always reflect all available information. Therefore, every investor is best served by a portfolio of index funds. The wise portfolio manager, however, knows that all this “information” that is immediately reflected in the markets is actually investors’ perceptions of the information and expectations of what it might mean for the future.

Recent bubbles-followed-by-crashes in technology stocks and the housing market are strong indications that the markets are not truly objectively efficient. In our view, although index funds can be very effective in building portfolios of various asset classes, they should not be expected to outperform a well-managed portfolio, nor should they be viewed as less risky than managed portfolios. By definition, index funds deliver nearly 100% of the representative market’s return, and at least 100% of its risk.

Ability to relate to you and your needs

When investing your money, the investment manager must recognize that it is indeed your money. He or she must be able to truly understand you and your investment needs and goals, and relate market behavior and the firm’s investment approach to your personal situation, investment horizon, and tolerance for risk.

Willingness to assure that your needs are appropriate for the firm’s approach

Some investment advisory firms seemingly accept as clients anyone and everyone, regardless of whether the firm’s investment strategy is really right for them.

If your primary goals are protection of wealth and preservation of purchasing power and your portfolio manager’s goal is to turn a little wealth into a lot of wealth as quickly as possible, most likely you will be exposed to far more risk than you are prepared to handle – psychologically or financially.

So, avoid the “our-strategy-fits-everyone” firm. Find an advisor that has a well-defined investment strategy that fits you and your goals.

Focus on after-tax returns

If the income from your account is currently taxable, your portfolio manager should have the willingness and ability to manage your account accordingly, taking into consideration the tax basis and holding period of your investments.


What qualifications should you look for in a portfolio manager?

Wisdom beyond the conventional

Conventional wisdom and many financial advisers claim that the financial markets are efficient and every investor would be better off in an index fund. The exceptional portfolio manager knows that, if markets were truly efficient, they would not go into bubbles.


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