Making Cents: Eight pointers to help you in selecting a financial adviser

MANAGING your money can be challenging, which is why getting help from a financial adviser can be useful and important.
If you pick a good one, they can be a terrific asset because of the role they play in protecting and growing your money along with helping you put a plan in place that will achieve your financial goals.

On the flip side, if you pick a bad one, they could be a big liability doing the exact opposite of what you want and need from them.

The trigger for me to write this article was from encountering five people over the past month who all were on the receiving end of some terrible financial advice.

The advice received by one had the potential to wipe out, needlessly I might add, about 30% of the value of his pension fund. Another was given shocking advice about a redundancy payment they were going to be in receipt of.

Anyway, sometimes it can be difficult to figure out who you want on your team and who you want to stay away from so I’m going to give you 8 pointers that you need to be mindful of and things to be looking out for when assessing, reviewing, and selecting a financial adviser.

1. Testimonials
I’d say don’t be shy to ask any new perspective adviser for some testimonials because it’s good to know what others think of them.

It’s the first thing I’d ask from them.

A friend or colleague might have recommended them in the first place but what do others think of them? If they don’t provide a testimonial very quickly, why can’t they? If others have great things to say about them, they should be telling you about them before you even ask.

2. Pushy
If your gut is telling you that your adviser is pushing products on you, then listen to it.

Being pushy could be a sign that if you don’t take out a product with them, they won’t get paid or they may be directing you towards a particular type of product because they’ll get paid more if they sell it.

Or they are pushing you towards certain investments because they are tied agents which means they can only deal with one company. Which is fine if that company has the best product in the market for you but if it doesn’t and you’re unable to access other providers because your adviser can’t deal with them, that’s a problem.

Having an adviser who is free to choose from any number or all providers is what you’re looking for if you want true impartially and independence.

3. They’re a Speedy Gonzales
And what I mean by this is that with this type of adviser, it seems that time is always of the essence.

They want you to sign up quickly to an account or policy because if you don’t the account will be gone, and you’ll miss out.
And giving someone a nudge is fine if there is a particular closing date for an account but very often there’s not.

Asking you to sign quickly without giving you the time to consider and reflect on what they are proposing, then alarm bells should be going off.

4. Slow
If your adviser is slow to return calls or emails, that’s a real bad sign in my book.

A good financial adviser should have a relentless focus on their clients and part of this is ensuring they answer or return calls in a timely manner.

One financial advisory company I know of sends automated replies to people acknowledging the email but advising it will be 5 working days before they get a reply. What happens if the market is tanking, and you need to move money into cash? Surely you need someone you can access very quickly, but that can be difficult particularly if the firm of advisers you’re dealing with is a very big one.

5. Ego
Some financial advisers have big egos and love hearing the sound of their own voices.

They like using buzzwords hoping you’ll be impressed. And they don’t like being challenged when they recommend a course of action, and they are asked to explain their logic and reasons why.

This is because they’re either afraid of being found out or just don’t like their advice being questioned. And if this is the case, beware. A good adviser doesn’t mind questions, in fact they welcome them and they’re also not afraid to say, I don’t know.
Here’s another thing that might fall under this heading and that’s you wanting your adviser to refer you to a specialist if needs be.

They shouldn’t be giving you tax advice if they’re not a tax adviser or giving you legal advice when they’re not a solicitor. Money is a broad topic, and a good financial adviser will know when you need to use a specialist and a bad one won’t, if they think they know it all.

6. Affordability
I’m referring to this because it’s a comment I hear made by people all the time.

They complain that their financial adviser doesn’t factor into their plan, whether it’s affordable to them or not.
And in many cases, it’s not.

They may want to achieve certain goals like retiring early or paying off their mortgage early or paying off other debt quicker, or they want to do all of these things at the same time.

And then their adviser puts a plan in front of them which puts a cost against each goal. The problem, however, is that what’s required is simply not affordable.

But had the adviser asked them to record their monthly income and outgoings from the outset they would have known that, and they could have used it as a reference point and advised them that based on their income, what’s been asked is challenging, but what can be done is X and Y but not Z.

Or Z is possible but only if you amend your spending or earning by doing this………………….

7. One Size Fits’ All
It doesn’t and it shouldn’t.

If your financial adviser doesn’t know, or worse, care about your unique financial and non- financial life and doesn’t tailor advice for your individual needs, then it’s time to find someone who will.

They need to know everything that is going on in your finances, not just one particular area. There are many moving parts that are individual to you that your adviser must be cognizant of and build them into your plan.

8. How they get paid
This should be one of the criteria you set in your choosing a financial adviser selection process.

There are typically four ways a financial adviser will get paid - commissions, an up-front once-off fee paid by their client, an on-going annual retainer fee either paid by the client themselves or by way of a % deducted from the value of an investment or pension product (these are commonly known as trailer fees) and the final way is probably some combination of the three I just referred to.

Financial advisers have to be compensated, of course they do, we all appreciate and understand that. You just have to choose how you’d like yours to be paid, that’s all.

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If your financial affairs are complex and require on-going advice, then paying a fee could be merited or if your needs were more basic and require very limited advice or you only need an adviser to carry out a specific transaction for you e.g. arrange a life policy for a mortgage, then maybe them getting paid a commission is the best outcome for everyone.

There are many reasons you may need the help of a financial adviser i.e. house purchase, planning for retirement, a lump sum investment etc. and you want their help because you want to make the right decision, so finding an adviser who will do just that and is the right fit for you is important.

The purpose of this article isn’t to put you off seeking out an adviser either, I would encourage you to do so, because of the value add they can create. What I want you to be on the lookout for, and be aware of, are those signs I just referred to.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie