How to find a financial adviser

How to find a financial adviser

I often mention that you should find a financial adviser for certain things. Sometimes it’s good to get some professional advice. There are however salesman and snake-oil merchants out there who simply want their commission for some product that you really don’t need. So listen up as we navigate our way through the options and find our personal finance ‘go-to’ guy.

DIY doesn’t mean Do It ALL Yourself

Although I strongly advocated in favor of DIY Finance, I often consult with my own financial adviser when I have a big decision to make. Choosing to do Finance DIY right means not being ‘evasive’ and assuming that everything will be ok in the end, nor does it mean being naive and thinking that you’re too smart to get another opinion.

Finance DIY done right is a balance between accepting accountability for your own financial future, but appreciating that you cannot know it all and that there are good professionals out there who will help you find an excellent solution for your financial challenges.

A second opinion is always a good thing

If there is one good example of where ‘spending money to make money’ actually holds true and isn’t just a clever sounding thing to say, it’s in paying for good financial advice. Personal financial decisions permeate almost all aspects of our lives.

  • How much house we choose to buy and how much we’ll likely end up paying on our bonds for the next 20 years.
  • Where we invest our money and what our investment returns subsequently look like.
  • How we choose to spend our income in light of our relationship with our money.

Times are different and ours is now an environment where you can get unbiased and comparative quotes for many financial products from a financial adviser – at no cost.

Financial advisers are also there for more than just finding you the best financial product. They can advise on holistic financial needs and put entire financial plans together for you, whether you’re starting out or nearing retirement.

So when do I need a financial adviser?

This answer is both long and short.

Here is the long of it.

Financial products can be very confusing, especially when it comes to insuring your health or your ability to earn an income. We could never expect you to be able to compare gap cover policies yourself nor understand every definition in an income protection policy document without some guidance. That’s where a financial adviser can help, and hence the reason you should find a financial adviser that you can trust.

Financial advisers will have the experience and knowledge to guide you to an appropriate product, with no research required on your part. They’ll know the ins and outs of each product and be able to advise you as to what might be appropriate for your needs. Not only will they be able to give insight into specific financial products and insurance, they can ensure that each one compliments any others you might have and consider your complete financial position – adopting a holistic approach.

Is there an easier way to know when to get an adviser?

The shorter version would be to engage a financial adviser any time you buy insurance for anything, whether it is for life insurance, an income protection policy, or medical aid or gap cover. Engaging a financial adviser for investment advice is also appropriate and depends on your investing experience and know-how.

Where to find a financial adviser

Financial advisers are like most professionals; you can find them by word of mouth, an internet search or may come across one through advertising. Where you find yours is less important than finding one at all.

This is who I use and trust though.

I must however caution you that not everyone who purports to be a financial adviser is in fact such. A lot of financial advisers are in fact just salesmen or brokers for a specific financial institution and will generally only try sell you financial products from their company. They would likely be employees and be remunerated on a commission basis.

Dealing with these representatives is not necessarily a bad thing, but realise that you will not be getting impartial advice. Engage a representative from a financial institution when you know that you specifically want to do business with that company, not if you’re looking for an unbiased view.

This takes us on to our next point…

What licences should the financial adviser have?

A true financial adviser, who is legally permitted to give financial advice, must have a Category 1 licence in terms of the Financial Advisory and Intermediary Services Act. If you find a financial adviser who presents themselves as a true impartial financial adviser, you can verify that they are registered with the Financial Services Board and make sure that you’re dealing with the right person.

Advisers need specific sub-category approvals to advise upon specific financial products, ranging from short term insurance to investments. You will be able to see exactly what the financial adviser is legally allowed to advise on.

To achieve accreditation for each sub-category, the adviser will need to have evidenced technical competence for that specific field, so you can rest assured that they will have a solid basis to start advising on those products.

Making sure that yours is top-notch

This is slightly tricky. A financial qualification is necessary for someone to give financial advice, but how many they have and what they have, is not the be-all and end-all.

Good qualifications don’t necessarily mean that the person will look after your best interest.

The industry will tell you that a Certified Financial Planner (CFP) qualification is must-have when giving advice, but this is not necessarily so. Granted, a CFP would have learned a lot and would no doubt be ‘qualified’ to give advice, but don’t discount somebody else merely because they do not have the CFP designation.

Personally, I prefer to pay for someone’s time and will meet with various financial advisers before choosing the one to deal with. I see how they make me feel when I ask questions, listen to their advice and see how biased (or unbiased) it is. And I trust my “gut feel”.

Once you find a financial adviser that you really like and can trust, you will probably stick with them for years. I have known my financial adviser for over 10 years now.

Experience is useful, but most advisers have backup teams

A lot is learned in a text book, but there is no substitute for getting one’s hands dirty. Ask your adviser what experience they have and how many years they have been operating as a financial adviser.

Having said that, everyone needs to start out somewhere, so don’t let someone’s relative inexperience put you off. If they are acting as part of a wider team, where ideas are shared and proposals reviewed, even a more junior adviser could be suitable.

How much is this going to cost you?

The way in which advisers get remunerated has changed a lot in the last decade and it will continue to change. Some advisers charge for their time spent and may even earn a commission on the product they advise you on over time. This commission will be paid by the financial institution with who they place your money, but don’t think that you’re not paying a fee.

Ask your adviser on what basis they earn fees. They are legally required to offer you this information and make sure that you understand their fee structure. Paying an adviser fees is not necessarily a bum-deal. Where you should become an activist, is when you start paying fees that add no value.

Don’t be afraid of ongoing commissions, but be wary of upfront fees. There is often very little justification for charging you an upfront fee, especially when it comes to making investments. If your adviser wants to charge you an upfront fee, ask what the fee is for. Chat to other advisers and see if they similarly charge upfront fees for the proposed service or investment.

A parting “please”, go find a financial adviser…

Don’t be afraid to reach out if you feel that you need financial advice. Nobody would dare try managing their own cancer diagnosis, yet there is something about personal finance that leaves most people very cagey about their finances, even though financial mismanagement could leave you destitute for decades in your later years.

Nobody is asking you to share your salary slip with Facebook, but we would ask that you recognise your shortcomings when it comes to knowing how to manage your money and to not be afraid to reach out if help is needed. You’d ask for a referral for a good cardiologist or a plumber, why not a financial adviser?

We suspect that it’s because people are intimidated by people who know more about money than they do, as if they are somehow better at life than you are; by admitting that you’re incapable or at least poor at managing your own finances that it’s an indictment on your character.

It is this exact reluctance on the part of people to get involved in their own personal finances that has allowed so much mis-selling of financial products in the past, which left the industry with a very bad rap.

Financial Advisers are not fortune tellers

Please note: a good adviser will commit to nothing in so far as investment returns go, unless it’s specifically a guaranteed return and that guarantee is from a bona fide financial institution. If someone claims to know what the market is going to do, you might want to consider finding someone else.

Consider rather someone who acknowledges their soothsaying limitations, but focuses instead on providing sound advice on things you can control. Diversification, budgeting, estate planning, taxes, sound investment principles, low costs, and being a sounding board for good judgment when things get hairy.

You may not appreciate a lot of these cautionary words now, but you will over time.

Want a free 30 minute session with a financial advisor that I trust? Request a meeting here.

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