How to Choose a Financial Planner
I fully accept that I’m going to be a little biased here. After all, I’m a Financial Planner, and I want you to choose my firm. But you can apply what I have to say here whichever Financial Planning firm you decide to help you.
I think independent is the “gold standard” for financial planning and financial advice. There is a regulatory definition of independence that is about selecting investment products from the whole of market but equally important is the state of mind of the financial planner.
You need to choose a financial planner who has an open mind. They need to consider your needs without reference to pre-formed ideas and solutions. They need to spend far more time finding out about your life, your goals and your objectives than they spend selecting a product or investment fund for you.
The reason for this is quite simple. Financial products and investment funds have, in no small degree, become commoditised. There may be differences in terms of price and sometimes the knobs and whistles included in the product, but they are, in the main pretty much alike.
What independence should bring is the view that it may not be a product solution that you need. It could be that what you need is an action plan to get you to where you want to be, and that may not involve any new financial product at all.
A good financial planner will have transparency in front of mind. That transparency might well be in the area of costs. Costs for their services and price for the financial products that you have and or may need.
The financial services sector loves percentages, particularly when it comes to charges. Sometimes I suspect that this is because small percentages can mask real cost. It may not sound much to say that the cost is 0.5% because half of one per cent doesn’t sound very much at all.
But if half of one per cent in monetary terms is £2,950, then I think you will agree that will focus your mind quite well!
Good financial planners are transparent. They will always convert percentages into monetary amounts because they know that makes it easier for their client to judge value for money.
The financial planner you will want to choose will also be transparent about another four-letter word, and that word is “risk.”
Every financial decision that we make in our lives will carry advantages and disadvantages. A good financial planner will put equal emphasis on both. They will describe to you the downside of any recommendation as well as any upside.
This is particularly true when it comes down to investment risk. If you are investing any of your money you would expect the financial planner you choose to spend quite a bit of time with you finding out about;
-Your previous experience of investing money;
-Your attitude towards risk or more properly volatility, how comfortable are you with the value of your investments falling as well as going up in value? Will such volatility disturb you and cause you to lose sleep at night?;
-They will also examine your capacity for loss. If an investment loses value will that mean that you can’t have the life that you want or are your finances robust enough to withstand a degree of actual loss?;
Where a financial product is needed or where a course of action is recommended, the competent adviser will focus on its suitability for you. They will recognise that suitability isn’t something that can be applied to large numbers of people but you as an individual as their client.
Bringing it all together
There are some things that we might call hygiene factors. Are they well qualified? Are they experienced? Do you get on with your financial planner? Do they do what they say they are going to do? Do you trust them, do they seem to have integrity?
But a good financial planner will focus on the key things; independence of thought, being transparent in the way they describe and document things, making sure they communicate and manage risk for you and focusing upon the suitability, for you, of any recommendation they make.
It’s not easy to find and engage with a financial planner but if you consider all of these points you should find it easier and your relationship with them is likely to last.