Choosing Your Financial Planner


When To Engage A Financial Planning Professional

Not everyone needs a financial planner in the same way that not everyone needs a mechanic for their car. When I was growing up (40 years ago) many people serviced their own cars. They were simpler. A company called Haynes produced manuals which showed those with only the most basic skills how to do the job. Now cars are full of computers and you need to know as much about software as you do about carburettors.

Over the same time, the financial services sector has undergone a similar revolution and continues to be a dynamic and competitive sector. The number of products and services available have multiplied. This has resulted in many people seeking advice from different sources. One of those sources is a financial planner.

Who Does Not Need A Financial Planner?

A financial planner is a person who is professionally qualified and licensed to provide financial advice. Financial planners charge for their services and so you should only engage one if you need to. People who do not need a financial planner are those who:

  1. have the resources to do their own research
  2. have the time to manage their own finances
  3. are happy making their own financial decisions without advice

Often the people who fall into one of these categories have simple goals and are not investing a significant amount of their wealth.

Studies have shown a positive correlation between the percentage of a person’s wealth they are considering investing and the appointment of a professional adviser. For example, a multi-millionaire may not take advice on investing $100,000. However, if a person with a net worth of $250,000 was looking to invest $100,000 they would probably take advice. This is because if anything went wrong the effect on their economic life would be substantial.

How To Appoint A Financial Planner

A Financial Adviser delivers advice through a series of meetings. To be effective, a financial planner will need to ask you a lot of questions about your finances and objectives. Therefore, before disclosing this personal information to them, undertake some independent research on them and their company.  

Whilst you hope nothing will go wrong, a little research will help you know that the company they are working for is legitimate. Working with a licensed firm should provide you with some recourse to regulators if something goes wrong.

Professional Qualifications & Experience

In the UAE, there is no requirement for professional qualifications to be a financial adviser. However, many advisers have qualifications from professional bodies in their home countries. These are useful as they often require a commitment to an ethical code of conduct. So, check the professional body’s website to make sure the adviser is a current member. Some even provide details of complaints upheld.

Experience is also important. This is because economies go in cycles and each stage of the economic cycle has a different effect on each type of investment. A typical business cycle will last 3-5 years. Therefore I would recommend using advisers with more experience than this.

The next step is to look at social media. This content is less reliable. This is because it is screened by the adviser and their company. However, it is a useful guide. Look at blogs posted by the adviser – does the ‘voice’ appear to be reasonable? Are questions you want answering covered in the blog? Is the adviser specialising in a particular field?

Fiduciary Status

Knowing whether an adviser is a fiduciary or works for an independently verified fiduciary firm is important. A fiduciary is a person who sets aside their own interests and works for your interests alone. You may have thought this was a ‘given’ but it is not. The company I work for is an independently verified fiduciary. If the firm is not a fiduciary you need to know how you are protected from conflicts of interest between the firm’s commercial objectives and your need for sound financial advice.

Ask the adviser to give you details in writing of the service they will provide. Make sure this is the service you want – after all you will be paying for it. Then use this document to make sure you get the service you are paying for.

Method of Payment

Commission remains the standard payment method, although fee-based advisers (such as myself) do exist. Whilst there is nothing fundamentally wrong with this, you should ask for a currency value of the payment made to their firm. You should expect the same degree of transparency on charges as you would expect from any other purchase. For in-depth analysis of the two methods please click here.

Summary

Above all, the financial adviser/client relationship is based on trust. Trust needs to be earned over time.

Make sure the adviser working for a firm regulated by the local authorities. The regulator in your home country will not be able to help you if you have a complaint about the advice you receive outside of their jurisdiction.

Get all advice is received in writing and make sure you understand why a particular course of action is being recommended. Never make an investment into something you do not understand and make sure you know the charges for getting out of the contract should your circumstances change.

By following the above guidelines, you will be working with an experienced and qualified professional who is authorised to provide the service you want.

If you would like to discuss any of the points raised, please contact me on 00 971 50 594 5217 or via e-mail stuart.porter@aesinternational.com Alternatively, if you would like a free initial planning consultation please book it here.

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