With any relationship, whether we’re talking about family, finance or romance, trust is everything. In today’s ever-shifting financial landscape, a financial advisers’ level of ‘trustworthiness’ is an increasingly important attribute.
So why, you may ask, do you need a financial adviser, a financial planner, or both, in the first place?
Like any industry, the financial sector births new products almost daily. Each new shiny object seems more alluring, more confusing and potentially riskier than the last. Just like any industry, what is actually required depends upon a plethora of attributes including age, demographics, family and financial positions, lifestyle and status.
How do you navigate these intricacies to ensure your financial planning and fiscal solutions model your financial requirements and match your life objectives?
By relying on the expertise of financial advisors and the guidance of financial planners. And, how do you know if you can really trust a financial adviser?
Decide what type of help you need
Do you need a financial adviser, a financial planner, or both?
When it comes to considering future financial goals, most people don’t want to be sold a product. Instead, they want someone to understand them and their dreams and goals; someone who can articulate how they get from where they are now, to where they need to be.
People want clarity about their financial futures and a service that relates their life plans to a financial plan. A good financial planner will do this by supplying a comprehensive roadmap which realises the lifestyle they want to achieve or maintain.
Ultimately it’s wise is to educate yourself so you can ask the right questions to identify dependable advisers. It’s all about the questions you ask, the questions your adviser asks and determining the kind of business they operate, how they expect to be paid for what they do, and whether there are any conflicts of interest.
With that in mind, here are some of the areas you might want to consider.
Values
Anyone with integrity should be able to tell you what their values are, and the last thing you want is your adviser working against your best interests. Remember, you’re hiring a professional, not a salesperson.
Doctors and Lawyers are respectively bound by oath to do no harm and to represent their clients’ interests faithfully. Financial planners and advisors aren’t legally required to have their clients’ best interests at heart. For those advisers whose main focus is commission rather than their clients’ interests, this can very often cause a conflict of interests.
Anyone who tries to sell you a financial product or service just because it pays a commission, rather than how it fits with your needs, probably doesn’t have their values aligned with yours.
Conversely, an adviser that actively cultivates a long-term relationship with you, rather than focussing on successive commission-generating transactions can most likely be considered trustworthy. You would want someone who was upfront and honest about fees and commission (see page 7). Clear values and fee transparency are great indicators that you can trust a financial adviser.
Payment Terms
When you enlist the services of a financial planner or adviser, the service isn’t free. Much like a solicitor, accountant, real estate agent, or any service provider, financial service suppliers expect to be paid for what they do for you. You should be able to completely understand how they’re paid for their services and any transactional business they perform for you.
Here are a few key questions to ask your adviser:
Is there an annual fee? Can you pay a periodic retainer? Do they have an hourly rate? Are you invoiced each time for their services? Or will a fee be automatically deducted by the advisor from your assets?
Click here to read more about the questions you should ask your financial adviser.
You should expect a trustworthy financial adviser and planner to make sure this aspect of their business is entirely transparent to you.
Service Provision
Can your potential financial adviser and financial planner provide you with a breakdown of the services they offer and by what means, and how often you will hear from them throughout the year?
Or does your adviser give you a vague indication of how they operate after their initial contact? Does it seem as if they intend to cut and run after selling you a product? Do they want to put you on a mailing list for the sole purpose of badgering you with calls to sell you products and increase commissions? If so, then they’re probably not going to be your best bet.
If your adviser supplies you with details about regular forward-planning meetings, can keep your financial plan current by ensuring it reflects changes in the world and your life, and offers regular newsletters, articles, and market summaries, then it’s more likely they have a finger on the pulse of the financial world and everything influencing it.
Bedside Manner
Will your advisor take the time to talk to you? Does your adviser have the technical competence to answer any question you may have about your investments? Will your adviser spend whatever time is necessary with you to teach you what you need to know, to go through their recommendations, and make sure you understand everything?
Will they explain everything in an orderly, patient manner, using plain English?
If the answer to these questions is ‘yes’, then you may get to live happily ever after. If ‘no’…well, the story could end in tragedy.
Having your best interests at heart
Many people could use a little help from a professional adviser with planning and investing for the future, but how do you know whether your adviser has your best interests at heart, or is giving you the best advice for you?
Taking the time to understand everything about your lifestyle now, what you want to achieve in the future, and at every stage of your life, is essential to giving the right advice. If your financial adviser does not do this then, in all honesty, they have no right to talk to you about your money! If they don’t ask any questions about you, then it is unlikely that you should trust them as a financial adviser.
Asking, and being asked the right questions
You’ll probably prefer working with someone that inspires confidence and has the knowledge and skill to provide you with a service tailored to serve your interests. Your financial adviser should be able to answer your questions directly, provide documentation about all aspects of their services and business, and clearly articulate their value.
Real financial planning revolves around YOU, not your money.
Your adviser should spend time getting to know you; what you need, and what you want to achieve. To do this, they should talk with you about the lifestyle you have now, and the lifestyle you want in the future.
A great adviser’s questions should aim to understand what makes you tick, understand your aspirations, your fears and your concerns.
Click here to read more about the questions your financial adviser should ask.
