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How To Find The Right Financial Advisor?

Getting good financial advice will make a big difference to achieving your goals. You might want to borrow money to buy a house, save for a comfortable retirement or make sure you'll have money if illness meant you couldn't work. A good financial advisor hill be able to understand your financial goals, analyse your financial situation and recommend steps and financial products you may not have even thought of.

But "financial products" are just that - products. And like any other products, you need to do your research to buy wisely. These questions will help you work out if your financial advisor has your best interests at heart...

Is He Or She Qualified?

While paper qualifications is a good starting point, also find out how long the financial advisor has been working, and which financial institutions he or she has worked for. If they've moved around a lot in a short time, ask whether it was due to integrity or professionalism issues.

Does He Ask What Your Goals Are And Go Through A Fact Finding Process Before Recommending A Product?

If he starts pushing products down your throat before asking questions, run - don't walk - out the door. A good financial advisor will not rush through this fact-finding- because this is probably the most important part of financial planning. This step allows the advisor to understand you better, so he can recommend financial products that will help you work towards your goal.

A good financial advisor will not just ask about your financial goals, your current investment and insurance holdings, he will also ask about your investment experience and your "risk appetite", or how much risk you are willing to live with.

Does His Or Her Recommended Financial Plan Revolve Around The "In" Thing - Or Do They Choose Products That Suit Your Total Lifestyle?

A good financial plan should fit your lifestyle - so your financial advisor should also take into consideration your current financial health when recommending a plan. This means he should consider your debt service ratio (in other words the proportion of income you use each month to pay off your debts, including your mortgage).

He should also consider your "basic liquidity ratio" which measures the number of months you could sustain your expense should you lose all sources of income. And he should look at your "savings ratio"-the percentage of gross income a family or person should be saving.

Does He Or She Pay Attention And Act On What You Say?

A good financial advisor should always listen to what you have to say. He should respect your financial objectives and risk appetite. If you feel you're not treated with respect or courtesy, find someone else.

Is Your Financial Advisor Knowledgeable About The Products He Or She Is Selling?

He should be able to explain clearly why it suits you, the nature and objective of the product, and give you details about similar products. He should also be able to discuss the risks, price, duration of the investment, fees and charges. And he should be able to do it in a simple language anyone can understand - if he keeps using confusing jargon, even after you've asked him to explain, it may mean he doesn't know what he's talking about!

Does He Or She Disclose All Information To You?

A good financial advisor should provide information and take as much time as necessary to explain a proposed transaction. The advisor should also give you details about the 'free-look period' for life policies, cancellation period for unit trusts, withdrawal, surrender or claim for insurance and warnings, exclusions and disclaimers for investment and insurance products.

How Is He Or She Paid?

Is he working for a particular bank, or is he independent? Is he getting a fee from you for his work, or is he paid by commission, by various financial institutions, depending on what policies they sell? So before you start a relationship with your financial advisor, ask flat out how he charges. While it's not exactly the case that the higher the fee and commissions, the better the quality of advice, you should be wary if the services sound too cheap. However, if your advisor gets a US$5,000 commission from a certain firm every time he sells its financial products, you need to know. It is not illegal to work for commission - and it doesn't mean the product is not right for you.

What Personal Vibes Do You Get?

Choose someone you are comfortable with. The more your advisor knows about your financial situation and goals, the better the product recommendation will be. If you feel uncomfortable, you may not give your advisor as much information as you need to. If you are serious about having a financial advisor who can work with you through the different stages of life, through thick and thin, it's best to start the relationship right with a legal document spelling out the parameters of the relationship. After all, good fences make Good neighbors.

 

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