How To Choose A Financial Adviser

If you have decided that you need some help with your financial planning, knowing where to begin to find a good adviser can be a daunting task.

There is no shortage of information available online, but the difficulty is, sometimes there’s just too damn much information and filtering through it all can be a tedious and time-consuming task.

And you’ll often come away feeling more confused than when you started.

Then there’s the actual prospect of meeting with a financial adviser for the first time, which might feel quite intimidating, particularly if you don’t have a great knowledge of finance and investing.

And let’s face it, why would you, unless you work in the finance industry or have a particular interest in investing?

I’m sure you have enough to keep you busy in your own line of work without having to burden yourself with the particulars of portfolio allocation. But then, you are reading this, so you must have a bit of time to kill! 😉

There’s that fear of the unknown. You’re on their territory – it’s all shiny shoes and pin-striped suits. They’re using language that is unfamiliar – either to dazzle or bamboozle. [Note to self: must try to use the word ‘bamboozle’ more often.]

Do they know what they are doing?

Are they going to rip you off?

Questions, questions and more questions . . .

You’re worried about doing the right thing. Nobody likes to make mistakes with their money.

Finding the right financial adviser can be something of a ‘lucky dip’, but if you interview them correctly, you stand a greater chance of sorting out the good eggs from the bad.

Don’t get me wrong – I am sure there are more good financial advisers out there than bad ones in the total global population of financial advisers.

But I can say with certainty that there is a much higher proportion of advisers that are less likely to have your best interests at heart in the expat financial services sector.

And there is a simple reason for this: they operate in mostly unregulated jurisdictions and/or they sell mostly commission-based financial products.

Unfortunately, commission-based selling does not really sit well with impartial advice. It’s common sense. I’ve said it before and I’ll say it again and again!

Everybody will have their own ideas about their perfect financial adviser and different adviser personalities will suit different clients.

However, if you could write a list of the ideal,  overarching traits and qualities that make a good financial adviser, my wish list would like something like this one:

1) Honest and ethical

Nobody cares about looking after your money more than you or perhaps your significant other, but the Number Two person on the list of people who care most about your money needs to be your adviser.

2) Qualified

It goes without saying that you want an adviser who actually knows what he’s doing. If you’re an expat in a country that doesn’t actually require financial advisers to hold qualifications, find one that has financial planning and/or investment management qualifications anyway.

3) Good communicator

The adviser needs to use language you understand and should be able to explain everything clearly. If explanations are vague and salesy, the adviser probably doesn’t know what he’s doing.

4) Good listener

This is an important element of communication. An adviser should listen carefully to understand your needs, clarify his understanding and then find appropriate and timely solutions.

5) Delivers on promises

He doesn’t promise the Earth, but always delivers on what he promises. If your adviser lets you down, let him go.

6) Remembers your birthday

An adviser who doesn’t know stuff about you that is not directly related to your finances does not have a real relationship with you. Your kids’ names, your interests, where you’re going on holiday – you could say it’s all irrelevant and incidental, but actually, taking an interest in you shows he cares about you as a client.

Or he could be a stalker. 😱

7) Provides beer/champagne . . .

An adviser that can do all of the above and go the extra mile is a keeper! 🙂

But seriously, if you can cover the first five of these, you’re golden.

And if you happen to meet one that provides burlesque dancing, let me know.

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In my opinion, the most important trait is honesty. You’ve got to be able to trust that the adviser is honest. It should be a given, but it’s not.

I saw a business tip online the other day that was:

“Never hire anyone you wouldn’t trust with the keys to your house.”

For a second, I nearly pulled the lever to that imaginary trap door in my mind. It’s the one that leads to a dark, bottomless pit where I relegate other glib, infuriating and usually patronising sound bites from LinkedIn ‘business gurus’ and the like.

I dismissed it, thinking that it would be almost impossible to know if you could trust someone – a stranger, no less – with the keys to your house, purely after reading their CV and interviewing them over a couple of meetings, as you would in the normal recruitment process. Surely, it takes time to earn trust?

Stupid advice.

But then I stopped myself and thought about the nature of trust.

People often talk about ‘earning’ someone else’s trust, as if your actions can automatically result in a ‘payment’ of their trust.

But actually, trust can’t be earned.

It can only be given.

Doing the right thing, like being honest and reliable, might make it easier for someone else to grant you trust.

If you want to trust someone else, then you are responsible for granting that trust.

Of course, some people are naturally more trusting than others.

Granting trust in someone requires the belief that they are honest and if an adviser is honest (and competent), then you shouldn’t have to ever worry about questions such as:

Has the adviser really found the best solution for me?

Have all the fees been disclosed (not just selectively)?

Does he have the qualifications he says he has?

Is my portfolio being managed effectively and in line with my agreed risk profile?

Etc, etc.

I don’t want to give the impression that I think all financial advisers are liars. I don’t believe many advisers will tell you an outright lie, but lies of omission or being economical with the truth are a common tactic, unfortunately.

The most valuable commodity I have in my business is my reputation and that reputation comes from the trust granted to me by my clients – whether that was something that happened on the first meeting or over several years.

I am trusted by my clients, because they know that I have their interests at heart and I am not going to gamble with their money to make a quick buck for myself.

Unfortunately, the biggest side of the trust equation falls on the one granting it. After all, if you are putting your trust in someone, it is usually you that has more to lose.

So, the point of this post is to provide you with some good questions that will help you to make a decision about whether or not you can trust the adviser you are either currently working with or considering to work with and to help you make sure that it is “eyes-wide-open trust”, rather than “blind trust”.

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Questions to ask a financial adviser

Why did you become an adviser?

Many are in it for the money, but of course, they are going say that they do it because they like helping people! Here, you’re trying to get an idea of what motivates them as this will reflect the level of client service they provide. You may or may not get a sincere answer to this, but it will be up to you to judge.

How do you get paid?

I have covered this before in other posts and I am sure this will not be last time I mention it either! The reason being, it is important.

How the adviser gets paid affects the type of recommendation you receive and often, the level of service you receive after you have set up your account.

Commission-based advisers can’t really offer unbiased advice and there is a clear conflict of interest.

Hire an adviser, not a product salesman.

If you are ok with him earning a commission from the products he recommends, the next question would be, “Are you willing to disclose the commissions you receive?”

And if you are comfortable with the answer, then by all means, proceed.

What services are included if I become a client?

Ultimately, client serving is everything. You need to be clear on the following:

How will the relationship work?

Is communication and advice pro-active or will they wait for you to contact them?

How much contact will you get from your adviser?

How often do you receive reviews?

Which method of communication is used? Face-to-face, video-conferencing, telephone or Whatsapp? Can they adapt to your requirements?

What are the parameters of the financial advice given?

For example, some financial services firms offer holistic planning, which also covers more specialised areas such as tax planning and estate planning.

Others are little more than execution-only brokers.

Whatever the promised or agreed servicing level is, get something in writing from the outset. Good advisers should have some form of servicing level agreement and you should hold them to it. You don’t want to end up like this poor guy.

What qualifies you to provide financial advice?

Qualification and education requirements to be a financial planner or wealth manager vary from country to country.

The UK, for example, has increasingly high minimum requirements to operate as an adviser, but some other countries require no formal qualifications at all – particularly when the advice is for expats.

So be careful here and ask what certifications, qualifications and experience they have to their name.

That being said, qualifications do not guarantee the adviser is ethical and honest.

Some of the most unscrupulous advisers I have met had valid qualifications from their home countries.

Having qualifications does, however, offer peace of mind that they know something about finance!

Where do you invest your own money?

This can be a useful question, but you need to bear in mind that everybody has different financial planning needs and will be at different points in their financial planning life cycle, so the answer you get might be different to what is recommended to you.

However, if the adviser invests using the products he recommends, this is not a bad sign. If he doesn’t use one of the products he sells, you might want to ask why not.

How would the investment fit into my overall plan?

An adviser should not just be looking at how much money you have to invest in order to find a home for it.

A good financial planner should do a comprehensive ‘fact find’ to see how the investment fits in with your overall needs, wants and capacity for investing.

I once sat down with a potential client who was very clear that he wanted to start investing a certain amount of money each month, but when we looked at his situation properly, I discovered he had numerous consumer debts and bank loans that needed to be addressed before we could even think of entertaining the idea of investments.

Accepting a client’s money to invest without at least having some idea of his income and out-goings, or turning a blind eye to the fact he has other more immediate financial obligations would be irresponsible and will almost certainly be doing the client a disservice.

Do you have a sales quota?

This usually applies to commission-based advisers. Having to hit targets causes conflicts of interest, which means that recommendations you receive will be influenced by whether or not the adviser can hit his numbers this month. You want the advice to provide solutions to your problems, not his.

Can you refer me to an existing client?

This is an important one. If you can’t get a few testimonials from clients that have been clients for at least a couple of years, unless it’s a new adviser, that’s a red flag. Okay, I know a lot of people don’t like to give recommendations to anyone, but if the adviser can’t put you in touch with at least half a dozen happy clients, it’s going make you wonder.

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Below are a few additional general points to consider when thinking about hiring a financial adviser.

Organisations are not always better than individuals

Big firms that use model portfolios and automated processes can be efficient, but impersonal. Communication can often be less efficient than desired, since you are just a small fish in a big pond.

Working for a big firm does not necessarily mean the adviser is honest and competent. Having a flashy office does not necessarily mean the adviser is honest and competent. It probably just means he is good at selling commission-paying product to people.

Think globally, not locally

Technological advances over the last few years mean that communication and account management is easier than ever. You don’t have to rely on using whatever resources are available to you locally.

If you live in Dubai, but your adviser is based in Malaysia, it shouldn’t be a barrier.

I personally have many clients that I have never met face-to-face and we are located on separate continents. However, I probably communicate with them just as often as I do with clients that are living locally to me – if not, more often!

If an adviser is operating in a regulated jurisdiction, it does not necessarily mean that he is honest and ethical. Similarly, advisers operating in a non-regulated jurisdiction are not all dishonest and unethical. People are people and there are both good and bad everywhere.

Good bloke ≠ good adviser

It is important that you get along with your adviser, but, just because he’s a good bloke doesn’t mean he’s a good adviser. Equally, boring or blunt does not mean incompetent or uncaring.

Obviously, nobody wants to work with a complete a-hole though. Either way, you need to assess your potential adviser objectively on his competency and back that up with some confirmation from existing clients, so don’t be afraid to ask for testimonials and some client contact details.

Sales pressure tactics

If you don’t do it now, it will be too late!!!!

Don’t fall for old school sales pressure tactics. They’re so tacky!

Yes, you probably do need to take action to start your investments as early as possible, because you’ve been putting it off for years already, but that is your decision to make and if the adviser is hounding you to get you to sign on the dotted line, it means he needs the business to happen more than you do!

In this situation, it might be wise to seek advice from elsewhere.

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The bottom line:

Ask questions and keep asking them until you get a clear answer.

Don’t rush into anything, don’t be pressured into anything and work with an adviser you feel comfortable with.

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