Most of us consult experts in their fields when it comes to our health, fitness or careers, but do you follow the same approach when it comes to your finances?
A financial advisor should fulfil the role of financial consultant to help guide you on your financial journey. Your financial advisor should offer counsel based on your current financial situation and continue to provide advice personalised to your evolving personal circumstances.
How can you ensure that your financial advisor plays a more prominent role in your financial planning?
An important aspect of your financial advisor’s involvement in your financial planning is how connected your advisor is to your life. It is advisable to always inform your financial advisor of major life changes that occur, such as:
- Joining a new company;
- Moving to a new address;
- Getting married or divorced;
- Planning to emigrate;
- Having children;
- Planning to retire.
These are examples of important information that can help your advisor to provide you with the best possible financial advice for your circumstances. Other updates that could be considered insignificant, such as new contact details, are also necessary since your policies and investments need to be updated with such information.
In addition, here are some key questions to ask your financial advisor to increase his/her involvement in your finances:
- What is your investment philosophy?
Being aware of your advisor’s investment style can create a trusting professional relationship when you are assured that your advisor can create a portfolio that aligns with your values. For example, if impact investing is important to you, your advisor’s investment philosophy will confirm whether or not your advisor can assist with your specific investment goals.
- Are my investments aligned with my risk profile?
Your risk profile will inform your risk appetite for reaching your financial objectives. If you are a conservative investor for instance, the investment vehicles you are most comfortable with will not necessarily be appropriate for reaching your specific retirement savings goal. Your financial advisor can ensure a balance between the two by providing cost-effective and tax-efficient solutions for your financial strategy.
- How can I financially prepare for my next life phase?
As mentioned, keeping your financial advisor up to date with changes in your life can help you with the important future considerations of each new development. For example, when you are planning to have children, your advisor will assist you with saving for your children’s education and how to approach this specific savings goal. This is exactly what financial planning is: making provision for the future by considering current known variables.
- How are your fees calculated?
There are three standard ways for a financial adviser to get paid:
- Upfront commission: This is normally paid by a product provider such as Liberty, Discovery or Sanlam. The financial adviser receives commission for introducing a client to a product provider. The commission is based on the premium and the terms of the product.
- Advisory fees for unit trusts or platform investments consist of a percentage of the investment amount agreed upon between the adviser and client. There could also be an upfront or initial advice fee, as well as an ongoing advice fee.
- Ongoing commission is either a percentage of the premium or a fixed amount. This type of commission is paid to the servicing adviser on a monthly basis for as long as the adviser services the client/product.
Being aware of how your advisor’s fees are structured, creates transparency and trust in your professional relationship with your advisor.
- What are the latest investment trends?
It is important to be aware of new investment vehicles since they continue to evolve and adapt to the changing world around us. An example includes innovative funds structured around the world’s leading tech companies that are focused on industry-disrupting technologies such as social media, cloud storage and big data. Being cognisant of these developments allows more investment options and strategies to choose from.
If anything important comes to mind that you have not yet shared with your financial advisor, please feel free to reach out and schedule an appointment to discuss your financial needs.