Weekend Argus (Saturday Edition)
Have you asked your financial adviser these questions?
Perhaps you’ve been toying with the idea of finally booking that meeting with the financial adviser recommended by a friend, but there’s that niggle that’s holding you back from making the call.
“What happens when the day arrives?”
“What’s the best way to prepare?” “How will I benefit from this process in a way that matters to me?”
These are all common questions if you’ve never enlisted the help of an adviser. Likewise, if you have had a meeting with one, you may feel intimidated by the financial jargon they use, or simply the knowledge they hold, and are at a loss for questions to ask them.
I asked experts what questions they wished clients would ask them, to take first meetings and annual reviews from a one-way conversation to an open, engaging decision-making process that puts you in the lead role of your own financial success story.
FIRST MEETING How will you, as my adviser, add value?
Every adviser has their own primary reason for going into the profession; some specialise in investments, while others are more family-oriented and coach couples and families on their road to financial freedom. “A good financial adviser will be able to explain in simple terms what value they can add to a client, and they will have a good understanding of which type of person gains the most value from their service,” says Henri Le Grange, a Certified Financial Planner at Le Grange & Associates, a practice within Old Mutual Personal Financial Advice.
Terence Tobin, a family-focused financial adviser, agrees, adding that you can also ask how their process works.
“By asking these questions, you show you are taking an interest in your money, and that you know it is yours and you are ultimately responsible,” he says. “Your adviser acts as a guide, and ultimately you, as the client, are the pilot.”
What is your cost structure?
Don’t be afraid to ask this question ahead of your first meeting so that you aren’t caught in an awkward or ambiguous situation when it’s too late. Every adviser has their way of charging; it could be through a fee for an initial plan if you’re meeting once-off, or through commission on any products you may take out. Others may earn a regular fee depending on the investment vehicles you choose. “It is important to understand what the costs are for using the expertise of a financial adviser,” says Le Grange. “Once you know the cost and the value that they add, you can make a better decision.”
ESTABLISHED RELATIONSHIP Why do I handle my money the way I do?
Money is such a sensitive topic, and opening up about your past experiences with it – happy and sad – takes vulnerability. When you’ve found the right expert to partner with, embracing that vulnerability in a safe setting allows you to explore your relationship with money, and repair it where needed.
“Most consumers think that financial planning is about buying a product once the advice has been presented,” says Janine Horn, a Momentum Senior Financial Planner, “when actually it’s about undertaking a solution for your needs, setting a plan in action and measuring the progress. A financial advisor is an accountability professional who can help shape and improve, monitor and evaluate, and make strategic inputs into your financial well-being.”
What can I afford?
It’s one thing to have the minimum required income to qualify for financing, say, a car; it’s another to actually afford it with the disposable income you have.
A gap in understanding how vehicle financing works is something Jyoti Gopee, a financial planner at Pinnacle BlueStar, underwritten by Sanlam, sees all too often in her practice. “I notice this especially when it comes to the concept of residual or balloon payments,” she says. “Too often I observe clients having to refinance the residual itself.”
By looking at your projected instalments, insurance premiums and fuel spend, your financial adviser can help determine whether a financing agreement will help or hinder your budget.
What are the costs associated with my death?
No one likes to talk about death, but an even more difficult conversation arises when those left behind aren’t adequately provided for – whether it’s to give you a fitting burial, or cover the cost of daily necessities. “There’s the taxation, debt, partnerships, dependants’ needs, inheritances, estate costs (attorneys’ fees, valuations, independent audits), Master’s fees, executor’s fees and so on,” lists Horn. “It’s important to discuss the liquidity of your estate so that no asset needs to be sold to support these. Without an asset analysis, you are left in the dark.”
How will a lifestyle change impact my financial position?
Lloyd Ellis, an independent wealth planner at Solutions 2 Wealth, says he’d love clients to be more aware that any changes to their lifestyle within a short space of time could leave them in a more vulnerable financial position. “Many clients assume that because they have had an interaction with a financial adviser before, that they do not need to meet with this professional again,” he explains. “It is wise and important to revisit a financial plan at least once every 12 months.”