I have seen numerous individuals around me bring in a few money mistakes. I know of some who have not even once talked about a spending limit with their significant others, despite the fact that they’ve tied the knot. I likewise know other people whose relationships were breaking down as a result of secret debt, monetary animosity, and more.
But not for this couple who I got the chance to have a chat with recently. They were lovely, both young executives doing well with their money who were very much decided to go on the financial planning road together. They did a bit of an online search and later found the financial planner they thought were a good fit. To cut to the chase, they signed up for their services, paid $10,000 and went through what seemed like a fairly rigorous process.
We had a chat as soon as they received the actual formal financial advice and immediately knew that something wasn’t quite right. They weren’t shy to ask for our opinion. In all fairness to this advisor in question, there was a fair bit of education building which was great, and I love that they’re doing this for their clients. However, the downside with the plan that was laid out for them was the hidden agenda (with a touch of evil) in terms of the investment options provided.
I asked this couple a few questions, dug a little deeper and started my own research. That was how I found out that this company had engaged with a “mutual” relationship with third parties, which makes their advice quite biased if you ask me. The short end of the advice was that they were telling these people to buy a couple of properties, one via a self-managed superfund and the other outside of super, but as to what product was where they would get a huge incentive as it looked like a commission-based referral. And to me, this advice just didn’t pass the sniff test.
Thankfully, these guys reached out to me before they even had implemented any of the advice. After a thorough discussion, we’ve established that the plan just wasn’t ideal for them. But what was worse, it had become a huge problem because, one, they’ve wasted $10,000 on a financial plan that wasn’t going to work for them; and two, because they’d already spent a substantial amount on this financial plan they didn’t want to go and spend the same amount again on another one. Not only did they feel cheated, but even more so, this has put them in limbo where they didn’t want to go down one path but didn’t want to go down the other either. They ended up a little stuck, frustrated.
This made me think, what could they have done to avoid the situation? It’s basic really. They should have asked questions. Considered to be one of the barriers to money success, asking the right questions goes a very long way. Thankfully for these guys, they didn’t fall into the trap of following the advice, but it just was a bit too late for they already have invested money, time and energy.
One of the most important things that you should be comfortable with an advisor is to be able to ask them as many questions as you think is needed to get the results that you want from an advice process. Any advisor that’s worth your salt should be able to just answer your questions and make you feel at ease until the things that they are saying are making sense to you and that you’re finally on the same page.
A bunch of questions that you should just be able to ask upfront is, “how is it that you get paid? Is it from me? Are there sales commissions? Are there related businesses that you’re going to introduce me to that are going to pay you?” If there’s any and you’re comfortable with that, then that’s okay. We run a fee-only model, which I’m a little bit biased about. Personally, I think this is the best way of doing things because it means that there’s no financial motivation for any particular path over the other, which ultimately leads you to have more confidence in the advice process.
But regardless of how the advice business charges, you should just understand all of this even before you get any deeper. Then, you can make an informed choice about whether this is the right business for you. This puts you in a position where you can avoid any crap financial advice making sure that when you do take that step, you get the right results.