10 Questions To Ask A Financial Planner
Whether you are using another adviser, or are considering becoming a Reed Financial client, there are a number of good questions that you should clarify before commencing a trusted relationship.
Here are 10 that you should consider discussing at your meeting:-
1. How long have you been a financial planner?
Experience is invaluable, particularly after managing clients through both the up’s and down’s of markets and financial institution ‘innovations’. This experience could save you substantial sums of money as the adviser has potentially learnt the disciplines of managing money in the marketplace, as well as a broad spectrum of investor traits, innovative strategies and warning signs.
In saying this, we all have to start somewhere, and just because an adviser may have 15 years experience, it could be 15 times of the same advice year after year. So it’s important that you clarify more about the adviser’s history, their types of clients, and the type of strategic specialties that they may have.
2. What clients do you typically specialise in?
There are a variety of areas within financial planning that many advisers choose to specialise in. This could be retirement planning, estate planning, charitable giving, aggressive wealth accumulation, etc. Assess whether these areas are suitable for your circumstances and perhaps request some case study examples.
3. Will I receive written advice?
It is important that you receive a statement of advice that documents your goals, strategy and the facts that were used to compile the recommendations within the document.
Ongoing advice will often entail Records of Advice if there are only minor changes to your situation or recommendations. You may not feel comfortable providing a power of attorney for limited transactions such as share purchases or similar transactions. We don’t recommend this process at all.
4. How do you charge for your services?
Fees can be charged in a variety of ways, depending upon your choice and what the adviser prefers. It may be a fixed retainer per annum, a percentage of funds under advice, commissions or a hybrid mix of the two. There are pro’s and con’s for each, discuss the options with the adviser to determine what you are comfortable with.
5. Who authorises your advice and are you licensed with ASIC?
Financial planners must be licensed through the Australian Securities and Investment Commission. Planners will typically hold an authorised representative status via an Australian Financial Services Licence holder, or, hold the AFSL directly themselves.
You should ask whom the AFSL holder is, and if it is affiliated with any institution. If it is, then clarify whether any products, investments or insurances that are recommended provide any incentives link to the adviser.
6. How do you keep up to date with ongoing legislative requirements and strategies?
Financial Planners are required to maintain a minimum number of ongoing continuing professional development hours. This can be done via the AFSL holder professional development days, educational courses and monthly training programs. Clarify that your intended adviser maintains their professional development in a systematic method.
7. How often will I need my advice reviewed?
It is likely that your needs and circumstances will change over time. Clarify with the adviser how you would like the ongoing advice to be structured, eg. once a year, as needed, etc. You should aim to review your circumstances yearly, or even more where your situation is complex.
8. Do you have a documented investment philosophy?
If you are investing with your adviser, it’s important to have a written investment philosophy that you can adhere to during good times and bad. It will ensure that you are maintaining a disciplined strategy and increase your potential for a successful investment experience. Ask if the adviser has one, and clarify the success of it.
9. Do you benchmark my portfolio?
In your reviews, the portfolio should ideally be benchmarked. You may have your own thoughts as to which benchmark is appropriate, or the adviser may indeed have a benchmark that they currently use. Either way, it is a good idea to understand and measure how your portfolio is performing in comparison to the industry median. This allows you the opportunity to find out why, and to gain peace of mind that you are on the right path (even if it means the markets are going down at the time).
10. How do you substantiate that you are adding value for me?
To make sure that you are going to get value for money, simply ask how the adviser will assist you. There could be a range of factors including peace of mind, simplifying your financial affairs, trusted leadership, ongoing support and guidance as well as disciplined methodologies. If you hear promises of sky high investment returns, then it’s probably time to be wary.