5 Questions To Ask A Financial Advisor
Choosing to work with a new financial advisor (or planner) is a big decision. It is someone who:
You will ideally be working with for a long time – you don’t want to go through the process of changing planners unless you have to.
With whom you will share the fine details of your financial and personal lives with.
Will be, to an extent, responsible for your future financial wellbeing.
So, it really is important to get this decision right. But how do you go about doing this? You will come across a lot of company websites and brochures that say a lot of the same things and meet advisers who will say everything they can to persuade you to work with them. So, how do you differentiate, to find the advisor who is right for you? Here are five questions you should ask when looking for a financial advisor:
1.) What Are Your Qualifications?
You should look for a financial advisor who is highly qualified, to ensure you are working with someone who has the best possible skills and knowledge to help guide your financial future effectively.
The highest standard of financial planning qualification is the Certified Financial Planner TM (CFPTM) designation. The CFPTM is an international qualification, recognised globally as the gold standard in financial planning. In the UK, the CFPTM qualification is issued by the Chartered Institute of Securities and Investments (CISI).
There are only roughly 1,000 Certified Financial Planners TM in the UK (they can be found here: https://www.financialplanning.org.uk/wayfinder/find-planner). A more common higher-level qualification is Chartered Financial Planner, issued in the UK by the Chartered Institute of Insurance (CII).
2.) Do You Produce A Financial Forecast / Cashflow Model?
A sound Financial Forecast / Cashflow Model should be the cornerstone of any good financial planning. A good one should clearly illustrate your current financial position and what your future could look like, based on different decisions.
A Financial Forecast is required to fully consider (and illustrate) your present and future financial life. It is a good indicator of whether an adviser is going to consider your financial position and planning requirements as a whole or operate on a more product orientated (sales) basis.
3.) What Services Do You Offer?
It may sound obvious, but you need an advisor whose services match with what you need. The typical areas of planning / advice are:
Retirement Planning
Investment Management
Estate Planning
Tax Planning
Protection & Contingency Planning
You need someone who has expertise in all the service areas you require. An important area, as well as an area of wide divergence in approach and ability amongst advisors, is investment management. As a bare minimum the advisor should have an identifiable investment philosophy and process.
4.) What Are Your Fees?
What do they charge, both initially and on an ongoing basis? And what service does this cover – is this everything you require, or do additional services cost extra?
It is not uncommon (nor unreasonable) for an advisor to want to know some details about your circumstances and the level of work involved before providing details, but they should be able to provide a rough indication by the end of a first meeting.
The level of charges should be separate from any products or investments you take out with an advisor (although for convenience / tax efficiency you may choose to have them paid from a product).
If you are investing with an advisor, there are several issues to be mindful of. All charges should be disclosed in £ terms as well as %. You need to watch out for high initial charges (3% or 5% of invested assets are unfortunately commonplace and can be hugely and unnecessarily expensive) and exit costs – you shouldn’t need to lock yourself into something that you have to pay to get out of.
5.) How Often Do We Review My Plans?
A static one-off financial plan is only of so much use. It should be a living thing that adapts and evolves with your life. The main benefit of a Financial Forecast is that it can help you see the outcomes of difference scenarios and strategies, to help you make the big decisions. To do this, it needs to be kept up to date.
A financial plan should be reviewed annually, or whenever a major life change occurs. If you are also looking for investment management services, you may wish to meet more frequently.
So, in summary, you should be looking for an advisor who:
Is highly qualified (ideally a CFPTM, but at least Chartered),
Does proper financial planning with a Financial Forecast / Cashflow Model,
Can provide the services you require,
Has a reasonable level of fees,
Will review your plans with you regularly
If this sounds like too much to expect, please let us know. Either we will be able to help you, or if we decide we are not right for you, point you in the direction of someone who can.
Image source: Unsplash
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