Liam has 10 warning signs of poor financial advice
The relationship you have with your financial adviser is an important one, but how do you know yours, or someone you’re thinking of working with, is a good one?
I want to give you 10 signs you can measure them against, and if they fall into more than one, it’s time to cross them off your Christmas card list and start looking elsewhere.
Don’t be shy to ask for a testimonial because it’s good to know what others think of them. A friend or colleague might have recommended them in the first place but what do others think of them? If they don’t provide a testimonial very quickly, why can’t they? If others have great things to say about them, they should be telling you before you even ask for one.
It goes without saying but let me say it anyway - your adviser needs to be properly qualified.
They need to have those credentials after their name of QFA i.e. a qualified financial adviser or CFP (certified financial planner) They need to have these at a minimum but don’t be fooled either by the number of letters after their name. It doesn’t mean they’re experts. They passed a minimum standards exam, that’s all.
If you feel your adviser is pushing products on you, and your gut is telling you they’re not right or you’re not getting a satisfactory explanation or reason, be careful. Being pushy is a sign that if you don’t take out a product with them, they won’t get paid a commission.
If your adviser is slow to return calls or emails, that’s a bad sign. A good financial adviser/practice will have a relentless focus on their clients and part of this is ensuring they answer or return calls in a timely manner.
One financial advisory company I know of, sends automated replies to people acknowledging the email but advising it will be 5 working days before they get a reply. What happens if the market is tanking and you need to move money into cash? Surely you need someone you can access very quickly. But that’s the problem with big organisations.
Avoid an adviser who is inwardly focused, and what I mean by that is that they are focused on how they can benefit from working with you and what money they’ll make.
As opposed to being outwardly focused, where their starting point is how can they help and add valve to the person sitting opposite them. If that’s their starting point, you’re in good hands and you’ll get that sense from the questions they ask and that gut feeling you’ll get from them.
Some financial advisers have big egos and love hearing the sound of their own voices.
They like using buzzwords hoping you’ll be impressed. And they don’t like being challenged when they recommend a course of action and they are asked to explain their logic and reasons why.
This is because they’re either afraid of being found out or just don’t like their advice being questioned. And if this is the case, beware. A good adviser doesn’t mind questions, in fact they welcome them and they’re also not afraid to say, I don’t know.
Communication skills are important. They should have the skills to explain any complicated financial terms to their clients ’ in a manner appropriate to their clients’ knowledge level.
They’re yes men or women.
What you don’t want is an adviser who tells you everything is great when it’s not. You want the truth and they mustn’t sugar coat their advice or avoid having an awkward conversation with you. If you or they have a difference of opinion, have that argument if needs be. Remember the ultimate goal is your financial well-being and an honest diagnosis good or bad is better than none at all.
If your adviser tells you to do something because everyone else is doing it, be careful.
The one size fits all product is a dangerous one. We’re all very different which is why it’s important that any advice given takes into account the differences and nuances that exist for each individual.
If your financial adviser doesn’t know, or worse care about your unique financial and non-financial life and doesn’t tailor advice for your unique needs, then time to find someone who will.
The road to financial independence requires sacrifice, time and effort. Anyone who promises you quick wins where everything sounds just too good to be true, it probably is. A sure fire sign of bad financial advice is when the outcome is fast and easy.
A couple of years ago, an individual had a sum of money to invest and he came to me looking to see what I could offer. And he told me that he met with another adviser who had promised him guaranteed returns of 12% net per annum.
If he can offer you that, then why are we even having a conversation I thought. And thankfully the man saw right through the smoke and mirrors and chose me instead, even though I was offering him much lower returns.
And the lesson is, if you come across advisers guaranteeing you those types of returns without any risk, I’d say get out of their office and fast.
Finally, if your adviser tells you, you don’t have any options and you must do this, be careful. When it comes to your money there’s rarely only ever one option - Liam.