When to Opt for a Financial Advisor (and How to Find One That’s Worth Your Time)

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In the vast world of finance, it’s easy to find yourself lost without an experienced guide to light your path. And by guide here, of course, we refer to a certified financial consultant.

Whether you seek sound pension advice, need help with picking a suitable health insurance plan, or are looking to capitalise on what is still an untapped market niche, you’ll only benefit from someone who is able to manage your finances in a well-informed and ethical manner.

So, how does one go about finding an advisor? We’re going to dive right into it, but first…

Why should you hire a financial advisor at all?

 

Financial planners are certified and highly experienced individuals who will:

  • Help you demystify complicated aspects of certain financial products on the market;
  • Offer you detailed market analyses and aid you in pinpointing your financial goals;
  • Design a cost-efficient plan with actionable steps on how to best achieve said goals.

Financial consultants can come especially in handy when you need help with:

  • Pensions;
  • Investments;
  • Mortgages;
  • Life & health insurance;
  • Tax & inheritance planning.

Restricted financial advisors vs. IFAs

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Restricted financial advisors

As the name suggests, consultants under this category either specialise in a given financial field, for example stock investments, or work with a single financial product, such as pensions.

While restricted advisors can be helpful under some circumstances, it’s worth noting that they can sometimes let their biases slip through the cracks and thus risk rendering your financial plan completely worthless.

Independent financial advisors (IFAs)

So, what does an IFA do any differently than their “restricted” colleagues? IFAs, or “fee-only” advisors, are experts who specialise in a wide range of financial topics. They are also forbidden from striking agreements with financial firms or other product providers.

What the latter essentially means is that they are much less likely to recommend you products or services for personal monetary gain. We distinguish two types of IFAs, depending on the methods they are using:

  • Platform-based IFAs. Use special online platforms that include a wide range of financial products in one convenient package. Typically, experienced advisors will use more than one platform to ensure that they act in their customers’ best interest.
  • Model portfolio users. Choose between a set of ready-made financial portfolios that are built around specific risk profiles. Seasoned portfolio advisors will provide their clients with more than one portfolio to suitably meet their risk appetite.

How to find a good financial planner

 

Alright, now that we’ve established why you may need a financial advisor and the flavours they come in, it’s time to talk about how to find one that will get the job done— and do it well.

As you are probably well aware, becoming a successful entrepreneur requires solid discipline. The same principle applies when you’re out hunting for a certified financial planner—it’s all a matter of following 6 simple, but very crucial steps.

Step 1: Define your end goal

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Pen to calendar checklist

 

Are you looking to receive financial advice on how to pay out your mortgage? Then your best bet would be to find an expert who specialises in this field. If your goals stretch across multiple industries, then you’re better off seeking out an IFA.

 

 

Step 2: Hit the library

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Pictured: huge library

Before you sign up for a financial advisor course, you need to study their qualifications to understand just how finance-savvy your potential candidates really are.

For starters, all financial planners in the UK are required to meet RQF’s (the Regulated Qualifications Framework) level 4 requirements, meaning that each of them is well-versed in the following:

  • Regulation and ethics;
  • Investment principles and risk;
  • Personal taxation;
  • Pensions and retirement planning;
  • Financial protection (Level 3);
  • Financial planning practice.

Other financial advisor qualifications include, but are not limited, to:

  • ISO22222. Offered by the International Organisation for Standardization, this standard receives international recognition from all financial bodies and is renewed annually.
  • Certificate in financial planning. An extremely high-ceiling exam that only 22% of advisors end up passing.
  • Chartered financial planning. The highest possible qualification attainable from the Chartered Insurance Institute. A chartered advisor is guaranteed to have 5+ years of experience.
Step 3: Confirm the advisor’s credentials

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witty-sign-on-side-of-skyscraper

 

Just because an advisor has written “Chartered Financial Planner” on their business card doesn’t necessary mean that they are officially certified. In order to ensure that your prospect mentor is who they really say they are, you will need to do some further digging around.

 

  1. Start by visiting the The Financial Conduct Authority (FCA) register to double-check if the financial planner has passed all relevant exams.
  2. Should a candidate state that they hold an ISO 22222 qualification, you can easily confirm or disprove that by heading to Standards International.
  3. If your worst fears have been confirmed and your advisor is a fraud, you can turn to Unbiased—a free service that helps you find a local consultant who answers your criteria.
Step 4: Contact your prospective mentors

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businessman talking on smartphoneBy now, you should have already weeded out all unsuitable persons and be left with 2 to 3 potential candidates. The first step is to give each of them a phone call in order to gather some first impressions.

A good rule of thumb is to decline advisors who are keen on immediately offering financial planning and analysis. Instead, you should keep those who ask you what type of advice you actually need, as well as what goals you have in mind.

The second step is to invite everyone who passed the phone exam to an interview. At this point, make sure to keep an eye out for certain red flags, such as:

  • The advisor is requesting upfront payments. The very first meeting should be free of charge, so avoid advisors who demand payment from the get-go.
  • The mentor makes you feel uneasy. If you feel like you’re being pressured into making decisions, cancel the appointment immediately.
  • The financial advisor’s fees remain a mystery. Experts who are ambiguous about their rates usually hide something. Give them a pass.
  • The expert was able to attend the meeting within mere days or hours. Good advisors have a very busy schedule, so they usually set up waiting lists.

If the person exhibited none of the behaviour above, seemed friendly, was an active listener (as opposed to incessantly browsing on their phone), and made an effort to understand where you’re coming from, then you are one step closer to finding the perfect financial mentor. Before the meeting is over, however, don’t forget to also…

Step 5: Ask all the right questions

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woman-asking-question-at-workshopRun-of-the-mill advice has never benefited anyone. In order to gauge the financial skills of each candidate, you will need to stage a small Q&A. Good questions to ask include:

  • Can they provide a quick rundown of the services they have on offer?
  • What type of qualifications do they have and who oversees their work?
  • Is their work fee-based, commission-based, or a little bit of both?
  • Do they swear by planning models or offer personalised tips as well?
  • Will they regularly update your portfolio after they’ve developed it?
Step 6: Monitor and analyse their work

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people-passing-a-document-folder

 

You received satisfying answers, shook hands, and now rightfully expect from your certified financial advisor to take care of business. But don’t get too comfortable just yet, because you still need to figure out whether what your mentor says and does is based on thorough research, or stems from deeply rooted opinions that could potentially come at your expense.

 

Be ready to immediately cut ties with the advisor if you hear any of the following opinions masked under the guise of helpful advice:

  • An economic forecast spanning several years into the future;
  • Speculations on the direction in which stock prices may swing next;
  • Rough estimations of the future revenue of a given company;
  • Focusing on industries with highly volatile growth potential.

As any financial mentor worth their salt will tell you, intricate financial planning in the long term is not something that can be achieved overnight. On the contrary, it’s an ongoing process that involves 3 different stages during which the mentor should:

I. Take an active interest in getting to know you as a person and not just as a client.

II. Identify your financial goals and design an actionable financial plan around them.

III. Constantly revisit and refine your plan to ensure that it stays consistent with your goals.

Final verdict

 

Landing on the right financial advisor can be intimidating and, sadly, something that can’t be determined by credentials alone. If you can’t land on a promising mentor by word of mouth, the next best thing you can do is to set your goals beforehand, scout for candidates online and, hopefully, quickly encounter the person who will resonate with you the most.

Your ideal candidate should be a proactive personality who connects with you on a deeper level from the moment they walk into the room. An advisor who can explain what they do and how much they charge for their work in a couple of sentences, and who doesn’t allow their pride or biases to come at your expense or cloud their judgement.

Finding such a person isn’t impossible. Just make sure to follow the steps we’ve outlined above—and the rest will follow. Until next time and best of luck in achieving your financial goals!

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