5 Questions You Must Ask
Before Hiring a Financial Planner
When it comes to your finances – a good plan goes a long way. Whether you’re climbing the corporate ladder, looking for a place to call home, planning a family or want to give your children the best education money can buy, an advisor can help you turn big life changes into big opportunities. But before you start reaping the rewards, you’ve got to find an advisor that ticks all the boxes.
Asking these five questions could mean the difference between make or break. So before you choose a planner, here’s what you need to know.
Are you owned or associated with any other companies?
If your advisor’s licence is owned or controlled by a superannuation company or bank then the advice you get may be skewed towards the financial products offered by that particular entity. Financial planners earn money either from commissions or by charging a fee for their services, which means that planners who rely on commissions might not be giving you unbiased advice. To get the most out of your financial planner, it’s important to know who they’re acting for and if it’s in your best interests. To be confident you’re getting unbiased advice, look for an advisor that is an ‘independent financial advisor’.
What’s your fee structure and what commissions do you charge?
Transparency is essential in any good relationship, especially the one you’ll build with your financial adviser. When it comes to fee structures, the main thing you want to look out for is if commissions are charged and how they are structured. Make sure you request a clear breakdown of how commissions are paid as they’re often disguised as placement, implementation or asset based fees. If you’re including insurance in your financial plan, ask your advisor if they take commission on that as well. Then if they do not, check whether they rebate it to you or cancel it out of the product entirely. To come out on top, look for an advisor with a fee for service structure. This means their revenue comes from their clients, not commissions, and isn’t linked to what you invest into or how much you invest.
How much do you charge?
When you’re choosing a financial planner, look for value, not for cheap. It can be hard to recognise value, so it helps to think about what other professions charge. A tradesperson generally charges between $50 to $100 an hour, while an accountant may charge a rate of anywhere between $100 and $500 dollars an hour. If an advisor quotes you $400 to put a plan together – think again. Assuming they earn $100 an hour, that means they’re only spending four hours building your financial future. That doesn’t take into account any of their overheads such as staff, technology, insurances and professional fees either. It’s entirely possible to spend 20-50 hours developing and implementing a financial plan, so if you’re not being charged much, you have to ask how the costs are being covered if you’re not paying. The reality is that good advice costs money, especially when it’s independent advice.
Do you offer more than investment advice?
Financial planning involves much more than just investment advice. A good financial planner will take the time to help you establish both where you want to be and how you can get there. From banking to budgeting, to building wealth and protecting it, your planner can help keep your goals on track and your strategy in sight. As your life moves through different stages, so will your financial needs. A planner that offers more than out-of-the-box advice has a lot more to offer you in the long run. A good planner is supposed to help you make good financial decisions, not just invest your money.
What have you invested in?
This one may seem a little personal, but it’s really quite logical. The person calling your financial shots needs to be able to walk the talk, so ask them if they’re putting their money where their mouth is. But beware of bogus claims – if your planner thinks they can outsmart the market and get-rich-quick, they’re not the planner for you. The only guarantee your planner should be making is good advice that matches your appetite for risk and your long-term plan. If they’re not investing into the same things that they are recommending to you, you may want to ask why.
To get the most out of your advisor, you’re going to need to share a lot of personal information. So, before you bare all, don’t be afraid to ask them the hard questions too. At the end of the day, you’ll need to feel confident that your adviser has your best interests at heart.