What do you feel when you hear the term ‘financial planning’? Apprehensive because you may find out things you don’t want to know or excited about tackling the next stages of your life with confidence?
When dealing with unfamiliar things many individuals reach for a reference guide – often Google! Our experience is that with something as individual and important as financial security and independence there is no “off the shelf” instruction manual.
As a result, people often develop financial strategies based on fear, greed, misinformation of sales agents and ignorance – which rarely lead to any positive outcomes. This can leave people feeling very frustrated, short-changed and fearful about their long-term financial security.
Our view is that no one knows as much as you about your finances as you yourself! As such you need to be the Chief Executive of your own financial destiny and a financial adviser should act as your Chief Financial Officer – using his professional knowledge to help to inform, advise and guide you to develop your own financial road map based on your specific situation and objectives and his understanding of taxation, budgeting, investment skills, forecasting, product availability and financial planning.
When selecting an adviser our advice is to:
- Check the regulatory status of the company in great detail.
In our experience, many international ‘IFAs’ are only licensed for basic insurance services, these often operate well outside their scope of authorisation and some are not regulated at all! It is always worth checking the exact categories of business that firms are licensed to conduct and should there be any doubt at all, AES London will conduct due diligence on any advisory firm without charge. - Ask what regulatory protection if any applies to the advice.
Sometimes, the advice you receive is simply outside the scope of regulation. Even when advice isn’t regulated, the products you choose might afford you some type of protection. It is important to understand what regimes and systems are in place to protect you and what recourse you have for complaint in the future. AES London can always offer a third party view of this protection without charge for any retail client. - Ask what qualifications your adviser possesses?
Educational qualifications are very important because they denote that the person has undergone training in his field and so is professionally qualified to give you financial advice. AES London is happy to explain what qualifications a retail client should expect of their adviser for different lines of business without charge. - Ask what kind of financial services are being offered?
What financial areas does your selected firm generally cover? These vary from Planner to Planner, depending on their educational qualifications, work credentials, work license, and financial knowledge. - Ask what work experience does the adviser have?
How many years have they been in business? Ideally the Financial Adviser should have been in the business at least 5 years. - Ask how many clients does the adviser have?
There should be enough clients to suggest experience and respectability, and not so many as to indicate a lack of time to attend to your needs. - Ask what kind of clients does the adviser have?
If there are other clients like you, the Financial Adviser will be better equipped to deal with your kind of financial situation. - Ask who will be working with you to deliver the financial outcomes you expect?
Most Financial Planners have a good-sized staff made up of researchers called para planners and administrators to assist with the work, so knowing who you are going to be dealing with is important. - Ask if they can you give you some references?
The Financial Adviser should give you at least 3 references. References should be from clients or independent professional colleagues from the finance field. After you have been given a list of references, make sure you call them. Ask the clients about their experience with this Financial Adviser. Find out from the colleagues what kind of professional standing the person has in his or her field. - Do you have clear terms of business and have your thoroughly read and understood them?
- How much will you be charged for their services?
How is the adviser going to be paid for their services to you? Some Financial Advisers charge fees by the hour or take a flat fee. Some take fees as well as a percentage of your total income whereas others take fees and a commission for the Financial Products that they recommend you to buy. If the Financial Planner works for a Financial Firm, you pay the Firm and they will pay his or her salary. In any case, at the start, ask for an estimate of the total costs involved. - Ask if the advisers consults with outside parties and ask how often?
Finance is a vast and complicated field and it is not possible for any one person, however talented and exceptional, to handle all the business aspects personally. A good financial adviser will undoubtedly refer to other professionals like lawyers, bankers, mortgage brokers, accountants, and others. The best advisers often belong to larger networks that deliver an array of specialised and technical services that could be of benefit to their clients. If these people are going to be involved in handling your financial affairs you should know who they might be. - What does the adviser do to keep abreast of current affairs in the financial field
The finance field is in a constant state of flux and, if you are to receive creditable advise about your investments, the Financial Adviser needs to have current up to date information. How does he go about getting this? Does he take refresher courses? Is he going to pass this information on to you at regular intervals so you have background information on his advice?
Many financial advisers are little more than glorified personal shoppers, flitting here and there to find off the shelf financial products to sell to you. In some cases this may be exactly what you want but in other cases you may want to benefit from an advisers trade discounts or have a coherent plan created with detailed objectives and cash flow planning. The key is to make sure that the expertise and service you expect is delivered to you.
Clarify everything that you don’t understand, make a note of all other things you would like to know and don’t hesitate to ask. If the adviser isn’t forthcoming – please ask our AES team in London who will research the adviser and their firm on your behalf.