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Your money is hard earned and you deserve a professional to work hard at protecting it. Sorting through the ocean of financial services can be downright intimidating. It is important to find the financial advisor that is right for you.

 

When you first talk with a financial advisor, you are interviewing them to see if they are competent and trustworthy. There are a few important questions you need to raise in order to assess the quality of the advisor:

1. What are your qualifications?

Financial advisors who are worth hiring consider themselves certified professionals, on par with lawyers, doctors, and accountants. As such, they should be able to clearly articulate their qualifications, financial knowledge, and ethical commitments. Anyone can wear a suit and put initials after their name.

There a hundreds of qualifications, some take years to earn and others can be earned in a few weeks. Orient yourself to the different financial qualifications so that you know their certification really means.

2. How are you compensated?

This question is so important! Asking this question will enable you to immediately discern if there will be conflicts of interest with the advisor. You need to know if the advisor’s financial incentives are aligned with your financial welfare. Do they give you a transparent answer or keep it vague? Advisors are paid, in general, in two ways: commission-based or fee-based.

Commission-based

The advisor is paid only an upfront commission (i.e. 7% of the first year’s premium payments).

They will be incentivised to do two things: 

1. Sell you the product that generates the highest up front commission regardless if it is best for you
2. Minimise their effort towards meeting with you and keeping you satisfied after the initial period since they are no longer compensated to do so

Fee-based

The advisors are paid a flat fee regardless of the investment product.  

For example, if the advisor manages $100,000 and charges 1% per annum on the assets under management, they would be paid $1,000.

 The advisor will be incentivised to do three things: 

1. Grow your assets as they will be paid more as your money grows. They will also be paid less if your assets decrease
2. Advise you in an independent way as they receive no commission from the investments recommended
3. Meet with you and keep you satisfied on an on-going basis

3. What is your approach to investing?

It is essential to understand the advisor’s philosophy(if they even have one) and process for allocating your money to the appropriate investment. Many advisors do not have a robust investment approach as they are fundamentally salespeople. Do they have a clearly articulated investment process? Do they invest your money in light of your unique situation or merely put you in the same product they put every client in because it is easy?

4. What do your clients say about you?

You can realistically expect to experience what other clients say about the advisor. Is the advisor responsive, caring, and skilled at growing their client’s wealth? Or maybe they are hard to get a hold of, do not follow through on promises, or do not deliver on investment performance? A good way to see real client feedback vs. merely what the advisor says is to look at their Linkedin profile and view the recommendations actual clients have written.

Our team here at Holborn Assets delights in discerning individuals who are willing to ask the tough questions. While many financial advisors would love to have a client who simply says “yes” and writes a check, that is not us. We want engaged clients who are proactive and curious. Clients who ask questions are serious about their wealth and their future.

Request an obligation-free consultation with us today


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