As a Financial Adviser that deals with young professionals, executives, and business owners, it’s common to see clients making good money but struggling figure out how to make progress with their money and worried they’re going to be forced to work until they’re too old to enjoy their lifestyle.
Personally I find nothing more rewarding than helping this sort of client build a clear plan so they can see how they can get from where they are to where they want to be with their money.
But how do you figure out if your adviser or potential adviser is right to help you get the outcomes you want with your money – better cashflow, cut your tax bill, set up investment plan, get into the property market or pay off your mortgage faster…?
Recently I’ve been thinking a lot about the most important qualities that make the difference between average or good advice and great advice, and how the very best advisers work with their clients. The more I thought about it, the more I realised how confusing this decision would be for someone without much (or any) experience working with an adviser.
I wanted to share this post to help anyone in this situation make sure they’re on the right path.
I’m happy to say that in the new era of Financial Advice, the days of the fast talking ex-used car salesman adviser are numbered (if not already over). Once upon a time this was not the case, as financial products like super funds or insurance policies were a rare commodity only available through an agent of one of the big institutions.
In today’s information age, thankfully people don’t have to rely on a knock at their front door to learn about the benefits of any financial strategy or product. You can Google your way across all the information even the most qualified Adviser is able to access.
This has lead to many Financial Advisers differentiating themselves by going above and beyond, I mean really pushing the boundaries to come up with great ideas to solve problems – often problems you might not even know you have – and figuring out the most effective ways to help you hit your financial targets (or sometimes sort out your financial mess!). I’m happy to know professionally a number of these Advisers myself, and thankfully my clients (and I’m sure the clients of these other Advisers) appreciate the effort!
One of the most common mistakes I see people make when choosing their adviser is that they don’t actually really understand the ‘why’ behind their recommendation. This can cause serious problems when you just sort of have a vague understanding of your strategy, but don’t really get it completely and just take it for granted that your adviser is looking out for only you. Often this will be the case, but you should still take the time to really understand the key benefits, risks, and alternatives of any strategy – this is the only way you can make a well-informed decision.
WARNING: if you jump into a strategy/investment/product without covering off on the points above, you’ll only have yourself to blame if something goes wrong!
This isn’t to say you need to understand the tax law in detail or be able to create your own financial models or spreadsheet of a strategy that’s been recommended, but that you should understand the strategy you’re considering as well as any relevant alternatives, and the reasons behind why what you’re doing is the best thing for you.
But buyer beware! – If your adviser can’t clearly explain the reasons behind their recommended strategy, it could mean the strategy isn’t the best for you – or even worse they’re making recommendations for their benefit and not just yours.
Whenever starting a strategy, making a big decision, or changing your financial direction, you should (as a minimum) understand the following:
- What the solution is and how it works
- What the benefits to you of doing this are
- What risks are involved (and yes there’s no such thing as a risk free strategy…)
- What other options you have available (alternatives)
- Why this recommendation has been made instead of the alternatives
- Whether the level of risk you’re taking is necessary to hit your targets
- How this fits in with your overall financial strategy or plan
Once these are covered off, you’re going to be in a good position to make the decision whether the recommendation or solution proposed is the right one for you.
While I love it when my clients tell me they trust me, it seems crazy to think they should make a big decision without knowing what the implications are – and owning their direction. At Pivot, we won’t allow a client to proceed with a strategy or make big decisions until we’re comfortable they understand the implications of the decision and the reasons behind why they’re looking to go down a certain path. It’s these reasons that will make all the difference to the money outcomes you get at the end of the day.
I mentioned that I know a bunch of other great advisers that operate the same way, and this seems to me to be becoming the new normal within the industry. To me this signifies the benchmark when it comes to giving advice, and is really the minimum standard when it comes to helping people with their money.
If you’re not getting this from your current adviser, ask questions or get a second opinion. There are enough of the new breed of Advisers out there that you should be able to find someone that gives great service, makes you feel comfortable, and helps you understand your options, the implications to you, and how any and all recommendations fit in with your overall plan.
Don’t let someone else be in control of your financial future – make the decision today to ensure as a minimum you know enough to make the decision whether a strategy or solution is the right one for you.