BY BALKI BALAKRISHNAN*
Like most things in life creating wealth also needs primarily a plan and then the successful execution of that plan over a period of time. Consequently, a financial plan is an ongoing process that enables you to achieve your financial goals and financial freedom. A financial plan is much more than just buying financial products or services
I stress the importance of a sound financial plan to my clients by telling them that they don’t need to be wealthy to afford a financial plan, but need one to be wealthy. A Financial Planner/Advisor is a professional who not only prepares a plan to achieve your financial goals but also is there for you throughout the life cycle of the plan to make sure that you succeed. Thereby, you are developing an ongoing relationship with an advisor and therefore it becomes critical that you choose the right one the first time.
So, how do you choose good Financial Advisor? The purpose of this article is to help you identify a good advisor. You should be mindful that your investment experience is going to depend on how good your choice is.
What would a financial advisor such as myself will look for in a financial advisor?
Qualification & Experience: Make sure that the advisor is qualified (CFP, DFP. ADFP etc.). You can verify this from their Financial Services & Credit Guide (FSCG) and/or their web site. Ask them to articulate their experience and specifically in the areas that you have in mind.
Transparent Advise Process: A good advisor should follow a definite advice process from beginning to end. The advisor should be able to explain the deliverables that you can expect, and the metrics by which the advisor can convince you eventually that you are better off financially by the advice. Therefore, look for a well-defined advice process from the advisor and ask the advisor to explain.
Independence: This is a critical requirement. Understand whom the advisor work for and how they are remunerated. Look for conflicts of interest. Make sure that they are independent and therefore can advise you on products and services that are in your best interest without any constraints.
Continuity: Financial plan is not a one shot affair. You need the advisor to walk the talk with you to achieve your goals. For a variety of reasons you may not be able to contact the advisor when you need them most. Therefore, make sure that the advisor has a backup in case you can’t get to the advisor.
Reputable Licensee: A financial advisor has to have a financial service license on their own or should be an authorized representative of a licensee who holds the license. The licensee and the advisors have mutual obligations. One of the important obligation of a licensee is to making sure that the advisor has the requisite up-to-date qualification, knowledge, experience and skill. The licensee also imposes a code of conduct and code of ethics an advisor has to adhere to. Therefore, look for a reputable licensee backing up the advisor.
Value Proposition: A good financial advisor will present a positioning paper after having done the research. This document will set out in broad terms the recommended solutions for your consideration, the cost of recommended products and services and also the advisor fees. A professional advisor will walk you through this document and then offer you the opportunity to terminate the advice process unconditionally if you do not see a value in the advisor’s proposition.
A clean record: Make sure that the advisor has a clean track record. You can search for this information in moneysmart.gov.au web site
Transparent fee structure: Understand how the advisor is paid and specifically the fees for advice on topics you seek advice on. Make sure that the advice you receive will add value to your financial affairs. A good advice costs but will make you financially much better off. Therefore, you should consider this spend as an investment.
COMMUNITY FINANCIAL SERVICES PTY LIMITED ABN 39 814 682 399 are Authorised Representatives of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, Community Financial Services Pty Ltd and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us at 0419 506 560 if you want more information.
Source: SAT November 2016 issue