In the field of behavioural finance, decisions relating to financial matters and investments are the hardest due to our emotional and sometimes irrational link to money.<\/p>\n
For this reason, it\u2019s important to find a financial advisor who can offer sound guidance around a core financial plan and investment strategy, notes Christelle Louw, Advisory Partner at financial services company, Citadel.<\/p>\n
The real trick is how to select a financial advisor. How do you know which one is right for you, Louw questioned.<\/p>\n
The financial advisor said that the close nature of the client-advisor relationship underlies the need to find a trusted professional who is the right fit in terms of your outlook, life and ambitions.<\/p>\n
“Too many advisors focus purely on selling financial products because they are rewarded solely by commissions linked to the volume of transactions they make.”<\/p>\n
To ensure that you are receiving the best possible financial advice, here are some questions to ask your financial advisor:<\/p>\n
International research has highlighted six key attributes to look for in a financial advisor:<\/p>\n
1. The industry\u2019s highest technical qualification<\/strong>, such as Certified Financial Planner status. This should ensure adequate technical competence with respect to investments, tax, estate planning, insurance, budgeting and other financial matters.<\/p>\n 2. A broad education and the ability to apply mature judgement.<\/strong> An advisor is dealing with your overall welfare and not just your finances. Therefore you need someone who is more than just a financial technician. Also consider the experience in the field of providing financial advice and client satisfaction as good measures to take into account when selecting your advisor.<\/p>\n 3. An intuitive and educated understanding of behavioural finance<\/strong>. You need someone who doesn\u2019t fall prey to the typical mental mistakes people make as a result of emotional decision-making.<\/p>\n 4. A fee regime which minimises any tendency towards biased recommendations<\/strong>. It is wise to avoid advisors who rely mainly on transaction-based commissions. Rather than helping you stick to your financial strategy in the face of market noise, such advisors may encourage you to trade regularly in order to increase their commissions.<\/p>\n Pay a fee for the service you need. Generally, advisors who are remunerated primarily on the basis of fees for initial and continuing advice are less likely to be responsive to incentives encouraging excessive trading.<\/p>\n No true professional is going to provide free advice. Free advice is often worth what you paid for it.<\/p>\n 5. Access to significant technical resources<\/strong> and a team to provide continuity of service, should your advisor decide to move on or retire. While there are many good advisors, financial strategies are so complex that no one person can know everything. A good advisor is like an upstanding general practitioner; someone who has the ability to call in specialists as and when necessary. You need to know who will be there to guide you through the continuous changes, events and crises that will occur, either in your life or in the markets.<\/p>\n 6. A genuine sense of care.<\/strong> There is nothing more dangerous than a highly intelligent person who cares only about themselves. A caring advisor will show an interest in you as a person and understand and appreciate you beyond the money you have in the bank. Ask yourself whether the advice given is for you, the person, or only for the wealth you\u2019ve accumulated.<\/p>\n “It can be difficult to identify the difference between the offerings of wealth management firms and private banks. They all look the same, talk the same and promise to deliver the best service. The key differentiator, however, is the focus of the business,” said\u00a0Louw.<\/p>\n The good advisor checklist<\/strong><\/p>\n Louw said that a client\u2019s need for financial advice and estate structuring often grows as they accumulate wealth and this often falls outside the expertise of the original advisor who focused on risk planning and product-driven advice.<\/p>\n Good advisors typically:<\/strong><\/p>\n Using your home mortgage to finance your business<\/strong><\/a><\/p>\n\n
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