DO YOU NEED A FINANCIAL ADVISOR?

The profession of financial planning is relatively new, the average pensioner will tell you that in their youth financial planning was not even a recognisable term. During and after the Second World War the depression made it virtually impossible for most people to make ends meet, let alone have surplus money to invest.

Access to financial advisors was the domain of the super rich.

As the world settled down to growth and prosperity and insurance and investing became viable for the masses, sales people were sent out in force to sell products to anyone who could afford them. Promises of great wealth were made with little to substantiate the claims. Future values were calculated on best case scenarios and when the products failed to deliver, investors became disillusioned and insurance sales people got a bad reputation.

Up until as recently as five years ago, the financial planning industry was seriously under regulated and an advisor was not really recognised as a professional, but rather a purveyor of products. If a doctor, lawyer or accountant acted unethically they each had an association or board that they had to answer to, but financial planners were able to walk away from their mistakes without any concern about repercussions.

This lack of accountability created a lack of trust in the public and much criticism from the media. Today the situation is entirely different. Financial advisors go through a rigorous set of examinations and have to be certified by the Financial Services Board. This process has separated the wheat from the chaff and only the professionals have remained in the business.

This is good news for investors because trying to navigate the world of financial planning on your own is a difficult if not impossible task. Anyone who earns a decent income can benefit from the services of a professional advisor. The key to a successful relationship with your advisor is team work.

They can guide you in terms of choosing the correct products for your objectives but if you are not totally committed to a long term plan no product in the world will perform the way it was designed if it is cancelled or not adhered to. The only way to guarantee true financial freedom is to become a partner with your advisor by educating yourself to the point where you can understand his or her recommendations, explain your needs in detail and be upfront about your situation.

A relationship with a financial advisor is generally a long term one so don’t feel bad if you go for a meeting and you feel there is no rapport. You need to feel comfortable with your advisor so it’s important that there is a suitable fit. When you set up a meeting for the first time explain to them that you will be interviewing a few others before you make your final choice.

It would be of huge benefit if you do some reading before hand to familiarise yourself with the terminology of the financial services world. Even more importantly if the advisor uses a word or term you are unfamiliar with, ask for an explanation. Make a habit of reading the Personal Finance pages in your favourite publications or online to keep up to date with?trends.

Once you have selected an advisor tell them everything, even if you gamble 20% of your income each month, this will have a significant effect on your plan.

There are many life events that will impact the advice you receive

For example, ageing parents that may move in with you, grown kids who periodically come home to regroup, children from previous marriages and over indebtedness, will need to be taken into account. Half truths and omissions will compromise your long term goals as the planner will not be able to make the correct calculations in terms of needs and affordability. If they do not have the full picture their advice will miss the mark.

While everyone would like to become rich, and could achieve that status within 20 to 30 years of income, most people retire with inadequate or very little wealth. The reason for this does not lie in incompetent advisors, bad products or even volatile markets; it lies largely with the investor. The single biggest obstacle to building wealth is commitment to a long term plan. If you can get this right you will achieve significant wealth.