Everyone knows or at least should know, the importance of getting sound financial advice from a qualified financial planner whenever they have some wealth to manage, or when they aspire to have some wealth to manage.
Managing your money without that crucial advice is extremely risky because financial planners are specially trained in making smart money management decisions, which is not something the average man (or woman) in the street can lay claim to.
To put it in the simplest terms, a financial planner knows the difference between a quality long-term investment and a short-term gamble, and that’s something you can take to the bank.
The most important criteria: Are they Wealth-Oriented?
Life is too short to waste time on ultra-conservative financial plans. You don’t want excess risk, but neither should you settle for a planner who does not understand the need to take a long-term view and invest into key growth assets that outperform inflation. If not then the outcome will be mediocre returns.
You should find a financial planner who focuses on the right aspect, namely that they’ll intelligently chase maximum returns for you while managing the risk appropriately.
If your financial planner isn’t talking long-term returns, or if they’re avoiding the issue of suggesting a wealth goal, it means they’re not wealth-oriented. If getting wealthier is your goal, you don’t want to choose a financial planner who doesn’t care enough about that.
Make sure they are a Fiduciary
Financial planners with fiduciary status are obliged to put your best interests first in any advice they provide. You’d probably expect all financial planners must do this but, in fact, not every financial planner is a fiduciary, and they don’t always advise in your best interests which are currently being highlighted in the Banking Royal Commission.
Instead, some financial planners may limit the advice they give to certain specific financial products or investments that are in their best interests, not yours.
When your financial planner has fiduciary status and charges a professional fee you at least know they have a higher ethical standard and won’t just be out to line their own pockets through flogging products.
Check their Qualifications
You’d assume that all financial planners are qualified to ply their trade, but some people using the title “financial planner” really don’t have the proper credentials to help you find a good parking space, let alone help you plan your future wealth.
What you need is a Certified Financial Planner (CFP), which means somebody who has done the training and earned the qualifications to provide financial advice to clients. When a financial planner has earned this qualification, it shows they are answerable to an industry body that awards this status to those who undertake the appropriate training and examinations to hold the title. Ideally, they will also have relevant tertiary qualifications such as an Accounting or Economics experience.
You can find out more about the importance and value of a CFP certification by visiting the Financial Planning Association website.
Check their Background
Being a CFP and having academic experience is not enough. You should also expect your financial planner to have a solid business background. Otherwise, you’re relying solely on their training to guide you, and while training is important, it doesn’t have the same refinement that people gain from working in real-world situations.
Choosing a financial planner with business experience means you have somebody who already knows what it means to take risks, solve problems, and above all be accountable for the decisions they make.
It’s a question of being able to walk the walk as well as talk the talk. Don’t invest your money with a financial planner who has never had any actual finances of their own to plan.
Usually scrolling down to the bottom of a website’s “About Us” page will tell you something about who is offering the service, including their credentials and business background.
Trust your Instincts
Your own gut is often your best guide. If somebody doesn’t feel right, then they’re most likely not right. It’s important to feel comfortable with your financial planner, and that won’t work if there isn’t absolute trust and confidence between you.