Image by: Neff Conner
By George Lamb
The role of a financial planner is clear and cut dry–to help you make decisions about your future well being, and make you understand the implications of the financial decisions that you face. You may be thinking: What the hell do I need a financial adviser for!? I can just manage my money myself!” Well, that may in fact be the case for someone who holds the title as crew member for McDonald’s, but for the guys with innumerable 0’s in their bank accounts, it’s an absolute necessity.
Consider the implications of taking enormous amounts of time out of your busy day to constantly set budgets, develop long term savings plans, deciding between paying your mortgage or putting money into superannuation and planning for retirement. Sounds like quite the task doesn’t it? Why spend unnecessary time managing your finances when theirs someone willing appropriately certified to do that for you?
The problem comes, though, when it comes down to choosing that special person. A choice this crucial is certainly not an easy one, as you must clarify whether or not the specific adviser is reputable and trustworthy. Not only that, but also someone who will work in your best interest, all while providing their own honest (key word) insight about reaching your financial goals. The task can seem daunting, but if you take a few safety precautions, your life may become that much more organized.
#1) Make Sure They’re Certified
This may be an obvious tip, as you wouldn’t just want to hire some stranger off the street and give them direct access to your finances. But not only do you want to ensure that they are certified, but you want to also thoroughly examine the financial services guide (FSG) they are required to provide upon the interview.
This guide will explain to you their license, their background, their experience, how they’re paid and who their owned by. This is very important when you first start out working with an adviser not only to assure that their legit, but to also have the comfort that they have had experience and have successfully directed people of high financial status toward their financial goals.
#2) Are They in it for Your Interest or Theirs?
Because people are so tough to read these days, trust amongst an adviser and the advisee is something that has to be earned, rather than immediately issued upon hire. Somebody can look or even act like they are in it for your well being, but may have ulterior motives. And this particularly applies to those select advisers who get remunerated upon commission rather than a flat hourly wage. Planners who work on commission may have ulterior incentives to push a certain life insurance package or mutual fund if they’re getting a cut of that revenue.
They become more of a salesman than an adviser. And the last thing you want is to lose financial leverage for someone else’s profit. You typically want to go for an adviser who works on a fixed rate, and upon reading your financial planners code of ethics, look for the word “fiduciary.” A word that means it is required by law for them to look into your best interest.
A major red flag that will determine whether or not you hired the right adviser is if said person is cajoling you into making a sale. A good adviser is someone who does their specific job: Advising. They won’t try to force you into making decisions or put you under high sales techniques. If they are paid more because you invest a certain way, then you have to question if the advice they offer is in your best interest.
#3) They Claim to Outplay the Competition
If a financial adviser groundlessly claims that she can outplay the competition, then you might want to get up and walk out the room in search of another viable candidate. The reason? It’s because no common adviser can make such uncorroborated guarantees (Unless they’re Warren Buffet), and if they do, that is a sign that they have the capacity for recklessness, which can result in a heavy blow to your finances.
It is extremely difficult, if not impossible, to consistently outperform the market. And any reputable adviser knows this fully and will never make such a rash declaration. Instead look for an adviser who can advise on proper asset allocation based on your personal risk tolerance and time scale. Someone who, upon looking at your portfolio, can do the same based on economic changes and trends.
Got any experience dealing with money managers? Was it the smartest decision you ever made, or is your wallet now ten feet under? Regardless, we would love for you to tell us all about it!