The financial adviser community can be a mixed-bag of success and failure. Anybody can decide to market themselves as a financial adviser, planner, or coach, with little-to-no qualification. Therefore, it pays to be cautious when entering a professional relationship with any consultant. Today, we go over the top five things to look for when choosing a financial adviser.
- Education and personal background
Going through the history and backstory of your potential financial consultant is a great place to start. It’s important to learn why an adviser feels they hold an opinion of worth or authority on the subject. It’s best to go with consultants who have proven that they are able to use their knowledge to achieve practical, perceptible results for their clients.
Usually, an adviser will display this information somewhere publicly, as it’s a major selling point for them. Look through their website, or any articles they may have written on other websites or their LinkedIn profile, in order to garner an understanding of their thought process, policies and practices, and qualifications.
- Formal certifications
It’s a great sign that a consultant is serious about their work when they have put effort into broadening or deepening their understanding of financial planning through various certifications. You can examine any certifications they might list, and even do some light research into the certifications themselves, to see what is required to receive them.
Knowing how a consultant expects to be compensated is important, because you – as a client – need to understand their incentives and possible conflicts of interest. Usually, a consultant is paid through ‘fee-only’ client fees, commissions, or a mix of both, known as ‘fee-based’. A conflict of interest is only really possible if you are planning to work with someone through commissions. While good financial advisers work very hard not to allow themselves to be influenced by these aspects of their work, it can happen involuntarily, or accidentally.
Fees are usually structured one of three ways: hourly, flat, or ‘assets under management’, which refers to a percentage of the assets that they manage for you.
- Compliance requirements
All financial advisers in New Zealand are required to comply with the Financial Advisers Act 2008, also known as the FA Act. The requirements for complying with the act are different based on the types of services provided, so it’s important to look into which type of adviser you are looking at partnering with, and whether or not they comply with the correct part of the FA Act. The different categories include Authorised Financial Advisers (AFAs), Registered Financial Advisers (RFAs), and Qualifying Financial Entity Advisers (QFEs).
- Working relationship
Before committing to a relationship, you need to know what it will be like. How does contact begin? How often will you meet? Do they operate over the phone, or exclusively in person? Also make sure you know how transparent the adviser is. Many financial consultants prefer to work ‘behind a curtain’ and tell their clients not to worry about how any of it works, but it could be important for you to have them answer questions about your investments. If that’s the case, it’s worth finding a consultant who’s happy to explain how they operate in clear and understandable terms.
Not all financial advisers are created equal
Ultimately, every client has different priorities, and so does each and every consultant. Entering into a working relationship with a consultant who is a bad fit could end up costing you considerably down the line, so it’s worth paying attention to the process before you even begin investing money. Put in the effort to check these five points and you’ll be able to comfortably and easily reach your goals. Talk to Collaborative Consulting today for goals-driven financial advice, and find out what makes us New Zealand’s trusted financial planning experts!