In these articles I am looking at the topic of financial advice and why it is worth paying for.

If you are to pay an adviser a fee, you need to be assured that you will get value for money. So, what should you expect?

A good financial adviser is a good listener. So, if you pick an adviser who spends all his time telling you how clever he is and no time listening to you, then this is not the adviser for you. A good financial adviser lets you talk. They will ask you to describe your dreams, where do you want to be in 5/10 or 15 years time. What would you want to be doing and with whom.

Once the adviser knows what you are trying to achieve, he or she can then review your existing investments, policies and bank accounts to assess your assets. Then the adviser will want to know about your liabilities, things like your mortgage and credit card debt. Please do not be hesitant about revealing these facts because the adviser needs a full picture. It is rather like telling the Dr that you drink just a bit too much or exceed your calorie intake. The Dr and the Financial Adviser have seen it all before. You are not the first person with debts but you could be a very happy person if your adviser can help you to deal with them.

If you are to build up sufficient assets in the future to achieve your dreams, you may have to save more money, so the adviser will need to know how much income you have coming in and how much you spend. You need to be prepared with these facts. Just because you have a large income it does not mean that you have surplus income which can be used for savings. Some clients find it very challenging to put together an income and expenditure spreadsheet. If you fit into that category, the easiest solution is to take along to your adviser 12 months bank statements and let him work it out.

In the early stages of a consultation, the adviser will need to discuss with you your attitude to risk. This is essential so that the advice can be tailored to your needs. Frequently we think we know our attitude to risk, particularly in day to day situations but it is not quite the same when you come to discuss the risks associated with investing your hard earned cash. In that case what you will be discussing is how you will feel if your investment goes down in value. The adviser will have a method of assessing your attitude to financial loss so please respond to the questions he asks you honestly. If you are seeking advice as a couple it is important that you both go through the process as frequently partners have totally different attitudes to risk and the adviser needs to take this into account.

I hope you are starting to understand that seeking financial advice is not just about the adviser selecting a product from a shelf and if that is what he or she is doing then you have to question how much you should be paying for that “advice”

In future articles I will look further into the financial advice process and what you should expect from a good adviser.

February 2013