A suitable financial product and a reliable advisor go hand in hand in ensuring that you are getting close to your financial goals. With a wide range of financial products available in the market all claiming to be designed to fit your needs, choosing one really becomes a pretty challenging task, which could be made more complicated by fine prints that come along each insurance or investment product.
This points us to the idea that a reliable advisor will be of great help in selecting the financial product/s that will support the household. How then do you choose the correct financial advisor for you? If there is one word for me to describe an ideal financial advisor, it is the word fiduciary.
In a nutshell, a fiduciary exercises prudence when it comes to handling financial matters of another person. An individual with a fiduciary responsibility is ethically-bound to act in the best interests of the other party.
In my opinion, trustworthiness, expertise in financial planning and transparency are three of the traits of an advisor that clients should check in order to assess if the said advisor will stand alongside clients and promote clients’ best interests.
As a potential client, one may experience challenge in assessing trustworthiness of an advisor as advisors always put their best foot forward, which is pretty much expected. Another thing to note is that trust is established through long-term client-advisor interactions that develop through time.
In this case, I suggest for potential clients to solicit names of advisors that are trustworthy from their close group of friends and/or relatives that they trust. Ask someone from your inner circle whether their advisors are proactive in managing needs and deliverables (claims, documents payments, etc.) of clients and if prompt in addressing concerns and inquiries.
Advisor visibility is also important even after the closing of the deal. Prospective client should also inquire whether the advisor has been unresponsive after the closing of the deal—it can be considered as a red flag for advisor trustworthiness.
One cannot overemphasize the importance of an advisor’s capability in financial planning. A reliable advisor does not only give general statements when talking to a client but rather provide a detailed plan given the situation of the client and providing actionable and sensible approaches, that is, how investments and/or financial products will help to achieve client’s financial goals.
An advisor should be articulate in financial planning and must be capable of breaking down ideas into concepts that can be easily understood. A prospective client may ask the advisor whether he or she has undergone training aimed to raise competence in financial planning.
Another indication of an advisor’s capability in terms of financial planning is the holistic approach that should be exercised when assessing the financial situation of prospect client.
In a way, an advisor should be able to have bird’s eye view of financial situation of client and how the resources of client can be effectively and efficiently utilized to address any of the following (if not all) aspects of financial planning – retirement planning, asset allocation, tax planning, financial management, risk management, education planning and/or estate planning while simultaneously being able to look into the details of an individual’s or household’s financial situation—income and expense breakdown, budget planning and behavioral aspect of money management.
We can think of an advisor as someone being able to use both a telescope (looking far) and microscope (looking into details) effectively.
On the other hand, a transparent advisor declares conflicts of interest (if there’s any) to client when recommending one product over the other after conducting thorough financial planning and coming up with shortlist of products to offer to potential client.
A common conflict of interest between client and advisor is the sale of a financial product that has a better compensation structure to advisor at the expense of suitability of such product to client and both parties must work together to address this concern.
In addition to this, the advisor should take the time and be willing to read through (with client) the prospectuses related to the financial product proposed and provide clarifications for any inquiries coming from clients’ end.
An advisor is an invaluable partner to one’s journey to reach financial goals. As an advisor, one should focus simultaneously on increasing competency and establishing relationship with client. As a client, one should look for an advisor that is knowledgeable in the field and creates meaningful partnership not only in terms of business, but beyond as well.
John Hero Alfonso Salvador is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 88th RFP program this March 2021. For inquiries, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-6248110.