The 10 Best Questions For Your New Financial Planner
A good financial planner can save you a fortune. But appointing one is not easy. How do you know whether the person you are speaking to is going to advise you any better than a relative or friend? Here are 10 questions to ask your adviser. I have added a comment on why the question is important and what you should be looking for. I have also added the answers I give my clients when they ask me. The questions are:
- What Is Your Regulatory Status?
- What Is Your Fiduciary Status?
- How Will You Help Me Achieve My Goals?
- Do You Specialise In A Particular Area?
- How Long Have You Been A Financial Planner?
- What Qualifications Do You Have?
- How Is Your Advice Delivered?
- What Does Your Typical Client Look Like?
- If You Are On Annual Leave, Who Would I Contact?
- What Are Your Fees?
What Is Your Regulatory Status?
Regulation is important as one of its key purposes is to protect the interests of financial services consumers.
Within the UAE, there are currently two regulators covering financial services. The Securities and Commodities Authority (SCA) and Insurance Authority (IA). These regulators will merge in the near future in an effort to streamline regulation.
Within the UAE, regulators oversee the activities of advisory companies. The companies are responsible for the advice their employees give. Within the UAE advisers must be regulated by either SCA or IA. Regulators outside of the UAE are unlikely to have the resources or the authority to investigate complaints within the UAE.
My Answer: Within the UAE, the Insurance Authority regulates AES Middle East Insurance Broker LLC under licence number 189. AES also holds several other licenses for jurisdictions outside of UAE.
What Is Your Fiduciary Status?
Most people imagine that a financial adviser is required to put the needs of their client ahead of their own. This is known as being a fiduciary. There are various ways for a firm to prove its fiduciary credentials. The most effective is to have an independent third party to assess the firm’s processes and advice.
If the adviser works for an investment firm or bank which only promotes its own products, this should be a red-flag as your adviser will not provide an objective comparison of other options available.
Clients of non-fiduciary companies need to ask how their interests are protected against the commercial interests of the company and/or adviser.
My Answer: AES has been accredited as a fiduciary firm by an independent third party.
How Will You Help Me Achieve My Goals?
This may appear to be a fundamental question but few people ask it, instead they assume the adviser has the answers. Until the adviser knows what your goals are the response will be general. Perhaps they will describe their advice process or client service proposition.
My Answer: I help my clients identify, prioritise and plan for their life goals. Initially, we have a brief discussion to make sure we are the right ‘fit’ for one another. Then there is a meeting to understand your goals and timescales for achieving them. I analyse this information and produce your personal financial plan. This is a long term road-map towards your life goals. Once implemented it is essential we meet regularly to track your progress towards your goals and to account for changes in your circumstances, the economy, tax and legislation.
Do You Specialise In A Particular Area?
Knowing what services the financial planner is not able to offer is just as important as knowing what they can offer. For example, most advisers are generalists but some advisers specialise in retirement planning or protection (life insurance etc.). This can be useful if you want advice on a particular area.
My Answer: I provide lifestyle financial planning which connects my client’s finances with their life ambitions. I build lasting professional relationships with clients not only setting them on the right course but also helping them maintain the right direction.
How Long Have You Been A Financial Planner?
Just because a person is greying at the temples does not mean they have lots of experience. They may have been working in an unrelated industry and only recently started work in financial services. Asking about their career and checking out their LinkedIn profile before the meeting is a good idea.
Ideally, your adviser should have been working in the industry for at least 5 years. This will have given them the opportunity to understand the real-world issues. They will have also seen the impact that the different phases of the economic cycle have on financial planning and client affairs.
My Answer: I started work in financial services in 1988. I qualified as a financial planner in 1994, in the UK. I have been living in the UAE since 2001, working exclusively with expats. Here is a link to my LinkedIn profile.
What Qualifications Do You Have?
Relying on experience alone denies prospective clients the wealth of knowledge that is condensed within the research of thousands of academics and fellow practitioners. Qualifications are not just proof of a certain level of knowledge, they show a commitment to a career.
There are many different levels of qualification from many professional bodies. The UAE regulators recognise the qualifications from CISI and CII. These global professional bodies provide exams up to the equivalent of Masters Degree level specialising in financial planning. Additionally, members of these organisations agree to abide by a professional code of conduct and risk being censured if they do not follow these rules.
The concept of continuous professional development (CPD) is also important. Financial Services is a dynamic field and keeping up to date is vital if your adviser is to add value to your financial planning.
My Answer: I have a first-class honours degree in financial services from Edinburgh Napier University, CII Diploma in Regulated Financial Planning, Certificate in Discretionary Investment Management, Associateship from CISI and Associateship from Society of Trust and Estate Practitioners (STEP).
How is Your Advice Delivered?
You should insist on all recommendations to be in writing.
The report or letter should be clear without using industry jargon. The report is an important document as you can use it later on if you need to refresh your memory about why you chose to invest in a particular way.
Advice should have three stages, a summary of your circumstances, preferences and objectives; an overview of the options available; and a section detailing the specific recommendation.
My Answer: in person and in writing.
What Does Your Typical Client Look Like?
Often advisers will specialise in a segment of society where they are able to add the maximum value. Experienced advisers will know who they work best with and will be able to tell you some of their attributes.
My Answer: My typical client is in their mid-40’s with school-age children. They either own their own business or are a partner in an international law firm. They own assets of between US$1 million and US$5 million. Common objectives are growth and mitigation of estate taxes.
If You Are On Annual Leave Who Would I Contact?
Everyone deserves a break. You want to know that your adviser has a locum who will take his or her place when they are away or off sick.
My Answer: AES partnership has a locum arrangement whereby we cover for each other when off sick or on annual leave.
What Are Your Fees?
Regulation does not require the disclosure of the fee. But good advisers will tell you and justify why they change the amount they do. All advisers should be able to tell you what they will charge for their service. Don’t sign anything until you are confident you understand the charging structure.
Whilst paying an adviser’s fee by cheque or bank transfer is acceptable, NEVER make a cheque for the money you are investing out in the name of the adviser or his/her firm.
Fees should align your interests with those of your adviser. So if your investment goes down so does his/her fee and if it goes up there is a greater reward.
Ideally, payments should be spread out evenly over the term of the contract. This means the advisor or their successor has an incentive to provide you with on-going service.
Ultimately, the objective is transparency.
My Answer: All fees within my written report.