When To Change Your Financial Adviser
Firstly, there are many highly qualified professional advisers out there doing a good job for their clients. However, there are a few ’bad apples’ doing harm to their clients’ financial wellbeing and the reputation of the profession. In this post, I highlight some situations when you should change your financial adviser. No-one enters a business relationship expecting things to go wrong but there are things we can do to protect ourselves. Here are 5 Warning Signs Your Financial Adviser Is Bad…
Sign #1 – Unlicensed
In most jurisdictions, it is the company the adviser works for which is licensed. The company is responsible for the advice given by its employee. If you have a complaint, the company is the first point of contact. If a company is not licensed (regulated) and your complaint is not dealt with to your satisfaction, there is no higher power you can complain to. Working with a licensed (regulated) company provides you with recourse to the regulator. In most instances, because regulated firms know you have this additional option, complaints will be handled better. For a list of companies regulatyed in the UAE by The Insurance Authority click here. For a list of firms licensed in the UAE by Securities and Commodities Authority, click here.
Unlicensed firms still work in the UAE. Few of the reputable mainstream financial services companies will offer unlicensed firms the right to recommend their products. This means unlicensed firms often promote products from smaller investment companies located in less well-regulated locations.
If the company your financial adviser works for is not locally licensed and regulated, you should change your financial adviser.
Sign #2 – No Relevant Qualifications
Financial Planning a key component of financial planning is knowledge. Financial services are becoming increasingly complex. To provide the high-quality advice you deserve, your adviser needs to have studied.
A lack of qualifications indicates 2 things. First no commitment to the profession and the ethics of a professional body. Second, no evidence of any technical knowledge. The purpose of a financial planner is to be your guide. Using their knowledge to help you plan your finances better. If the person lacks relevant qualifications (proof of knowledge), why would you pay them?
There is no minimum level of relevant financial services qualification within the UAE for financial planners. I would recommend a relevant university degree (economics, financial services etc) and a professional qualification.
When your financial adviser has no relevant qualifications, you should change your financial adviser.
Sign #3 – Cannot/Will Not Explain Charges
When you buy a product or service it is important you know what the charges are. This is no different for financial services. You should be told in clear jargon-free terms what the costs are. Not just the cost of the product but also the cost of the advice. You need to know what the impact would be on the value of your investment if you wanted to cash it in earlier than planned.
There is a direct correlation between the complexity of products charging structure and the amount of the charges involved. Old fashioned, structured products which charge high fees for cancellation are to be avoided.
There is no regulatory requirement for financial advisers to disclose commissions or fees in the UAE. There are some who will do this, and I would encourage you to use those who are transparent. In other jurisdictions, this has driven charges lower for investors over the long term.
If your financial adviser cannot or will not explain the charges, it is time to change your financial adviser.
Sign #4 – Not Listening / Or Gives Nothing In Writing
To provide you with accurate advice on your finances, a financial planner must listen to your concerns. They will need to know about your circumstances and preferences. If they do not, there is a strong likelihood your will not receive appropriate advice. You should also make sure you receive the advice in writing. The report should include:
- a summary of your circumstances,
- details of your objectives,
- the adviser’s recommendations;
- details of the charges; and
- an explanation of why they have made these recommendations.
Sign #5 – No Longer Contacts You Or Is Difficult To Reach
Financial objectives usually take a long time to achieve. Whether it is buying a house, funding for school fees or retirement. A financial planner should provide you with the service you have agreed with them at the outset. This should include at least 1 meeting a year to make sure everything is on track. Good advisers will also contact you with information relevant to you over the year.
If you cannot contact your adviser or they have not been in touch for a long time now may be the time to review your finances with someone else.
If any of these signs are familiar, I would recommend obtaining a second opinion on your finances to make sure they are in the best of health. My post on getting a second opinion can be found here.
If you would like to discuss any of the issues raised in this post, call me on 050 594 5217 or make a reservation in my diary by clicking here.