For a long time I have been trying to work out why investors take advice and why they choose their adviser.
How do you choose a financial adviser?
If you have ever received poor advice how do you go about choosing a new adviser? Or do you not bother on the basis that your experience has been poor to date, so you may as well go it alone?
We get clients approaching us from many different sources: some from professional recommendation – their accountant or solicitor; some by googling; some by recommendation from a trusted friend or family member.
It is a tenet of good business practice that you provide what a customer wants. If you can deliver greater value than the fee paid, then you have a win-win scenario for both the client and financial planner. Clients will often approach us with a technical query, hence it is obvious to presume that they are looking for an adviser who has proven technical competence.
For my clients who are retired or approaching retirement, with whom we mostly work, it’s capital preservation and income.
Ultimately it’s the legacy they are going to leave.
So how on earth do they establish that a financial planner can deliver all of that and provide value for money?
Thinking about all of this I thought I would try and prepare a checklist that I would use if I was trying to help someone choose a planner and I wasn’t available!
Fees: This is a difficult one as a lot of costs are opaque. Try and establish the total cost of investing including the adviser’s charge.
Technical Expertise: This probably just comes down to the number of exams passed. I don’t know any other way a layperson would check this out. Finding a Chartered and Certified Financial Planner is probably the gold standard you want to aim for.
Integrity: I have no idea how you establish this other than asking for a list of contact numbers of the adviser’s clients, so you can call to get a “trip advisor” perspective.
Trust: This one is going to be by gut feel initially and then established over time. Does the firm do what they say they are going to do?
Accountability: Do they accept responsibility for their actions or will they shirk responsibility if something is not up to par? This can be difficult to assess off the front foot, but again can be established over time.
Capital preservation and income: Can they show real life examples of what their investment process delivered through the last market crash? Client files can be redacted and shown to prospective clients.
The last thing I would want to understand is the culture of the business. Are they professional throughout? If you can find a firm that has been checked against the British Standard BS 8577 then you know they have undergone an external audit. Maybe even ask to see their last report. You can download ours from our website here MFP-BS-8577-Assessment-Report-and-Notes-2014.pdf
Don’t just rely on your gut instinct. Too often I am concerned about the advice I hear being given. You may not have the expertise or knowledge to truly do the due diligence necessary on an advice firm. Why would you? If you did you probably wouldn’t need to take advice! If you go to the dentist and it hurts you probably won’t go back! You may not know the pain from poor advice for many years to come, so be thorough in your checks and your diligence should serve you well.