This post has since been expanded. See also Financial Planner Checklist – 8 Questions You Must Ask. It includes a free one page checklist that can be easily downloaded.

Here’s an interesting situation, you find a financial advisor (planner) and get some serious advice. You decide to invest with them only to see that the advice is not creating better returns from what you had before, but the cost of the advice is slowly eating away at your savings. Worse still, you might find your investments have been going in reverse or even gone broke. The Five Ways to Save tips below will help you weigh up if the financial advisor is right for you.

1. Check the advisor and the advisor’s business credentials

Check with friends and family to see how they are going with their advisor and if they can recommend a good one, start there. Secondly do your own research on the web and try and catch up with three advisors before selecting one to proceed with. All advisors need to be qualified so make sure you seek to see their qualifications along with memberships of financial planning associations. And don’t forget the business, is it well established? Can the business get through another crisis? The firm should also be able to highlight what you can do in the event that you are not satisfied with the advice.

2. Get all the fees for the advice in writing

There has been a move to cut out commissions to help remove advisor remuneration conflicts (commission based advisors may well be tempted to offer the investment that pays the highest commission back to them as opposed to the best investment for you). Despite the move away from commissions, the advisors may still benefit from product rebates and other fees through their recommendations. So get your fee structure in writing and ask specifically what conflicts the advisor may have with their recommendations.

The advisor will often seek an on-going fee (advisor retainer fee). You need to be confident that you will benefit from this fee arrangement.  We also recommend you see our calculator in the Tools page that will show you the total cost of the adviser fee and products over the lifetime of your investment.

3. Is the advisor asking all the right questions

Poor advisors ask only a few questions and then move straight to solution mode. A good advisor will ask a lot of questions about you and will document the information. The more questions the advisor asks the better and they should also challenge some of your answers with follow up questions like ‘Why is that savings goal so important to you?’

4. Has the advisor discussed risk?

There are two areas of risk that a good adviser will discuss in detail with your. One being your attitude and understanding of investment risk. The other being risks which are difficult to control, such as accidents and sickness. Advisors that are like to simply ‘flog product’ don’t spend time on this. Good advisors do, they know that protecting you and your savings is the cornerstone of a good financial plan.

5. If you don’t understand the advice, leave it alone

The most important tip – If it sounds too good to be true then it normally is. Best way to check is do your own research. By doing your own research you’ll be surprised how much you learn. You’ll need to see right through the products and find out what the product is actually invested in. If you can’t do this, leave it all alone because the product is hiding something.

This post has since been expanded. See also Financial Planner Checklist – 8 Questions You Must Ask. It includes a free one page checklist that can be easily downloaded.

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