Money Talk Daily

Posts Tagged ‘financial advice’

Choosing the right financial planning professional.

When choosing the right financial planning professional, you need to ask them some key questions. Here are five questions to help you make the right choice:

1)      What experience do they have? If you chose a rookie financial planning professional you will probably get a cheaper service, but a more experienced adviser is more likely to produce better results.

Don’t jump to conclusions though. The younger, less experienced adviser might be dynamic, more enthusiastic, and a great planner to have on board, where as the older more experienced planner might be set in their ways, or waiting for the right moment to retire. Look for an answer which matches your own ethos. There is no wrong or right answer.

2)      What are their qualifications? All financial planning professionals require basic financial qualifications, but to be honest they are not rocket science, and can be passed with a few weeks study. It is very easy to get involved in financial services with the minimum of knowledge.

Look for those who have advanced qualifications, or are members of professional organisations such as the Chartered Insurance Institute or the Institute for Financial Planning. This shows a commitment to gain important knowledge. Those who only have the basic qualifications may be looking for a quick income in an industry which is lucrative to salesmen as well as financial planning professionals. Be warned!

3) How does the financial planner get renumerated? You usually are given three options; the adviser will get paid by commission direct from the lender, by fee from yourself, or a combination of the two. Advisers who typically work on a commission basis will try and sell you something, otherwise they do not earn. Fee based advice tends to be more impartial, and represents better value for money in most instances. Find out exactly how much they expect to earn, and do a sense check as to whether they are asking too much for what they are doing.

Be wary of the planner who charges fees in excess of what they would earn from commission. You may feel you are getting a better service by paying a fee, but the fee needs to be proportionate to the work which is being done.

A typical fee might be between £150 and £250 per hour for the work that is done.

4)      Ask them to detail any conflicts of interest. Do they get an introducer fee for referring you to a third party, or do they have close working relationships with particular insurance companies. If so, find out why, and make a judgement call on whether this is ethical.

If the financial planner recommends any financial solutions, ask them why it is the best for your circumstances, and make sure you understand the answer. Ask them what else they considered, and why they rejected it. Ask them if any recommendation is flexible, and ask them what features it has which benefits you. Ask them to put it in writing too!

5)      What is their approach to financial planning. How long do they spend creating a plan and strategy, and how long do they spend promoting financial products? How do they establish how much risk you need to take,  and how do they forecast cash flow into the future.

So called financial planners who cannot answer these questions without bumbling will probably be sly salesmen in disguise. Most, if not all of these questions should be answered without you having to ask, but I reckon 99 out of 100 times they will not.

Sometimes it is difficult to chose between planners, but try hard to ensure that you do not end up with the smooth talking salesman, as it could ruin everything you are trying to achieve. You do not want someone who is target or commission biased helping you plan your future!!

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A lesson on goal setting and financial planning.

Successful financial planning is not about choosing the right pension, or selecting the right savings plan, it is about having the right mentality, and being able to follow a proven strategy from start to finish.

First you need to look at  goal setting. I would say that goal setting is about 25% of the financial planning process, and without doing this, the process will not work at all. Imagine a car with 25% of its engine missing. It probably won’t work, and this goes for financial planning too.

Goal setting is an important subject, and cannot be covered in full on this blog, but more details can be found on my financial planning website. There are also specialist books written on the subject of goal setting which are well worth a read.

 The basics to goal setting are as follows:

You should set a goal for your benefit only. Not for the benefit of others, although there is nothing wrong if your goal benefits others indirectly.

You should make your goal positive in nature.

Your goal should be specific. You need to be able to imagine every small detail. The vaguer you make it the less likely you are to achieve it.

You must be able to picture your goal.

An example of a good goal could be:

“I wish to retire on my 55^th birthday. I want to have enough money to live a fulfilled life which includes playing golf on a weekly basis at the manor executive club. I will play regularly so I can beat all of my golf buddies.  I want to afford to have meals out with rosemary (my wife) at nice restaurants. We would enjoy good quality meals such as roast beef and Yorkshire puddings, and steak in red wine sauce. I would also like to take 4 holidays per year. I would like to take three foreign holidays, and explore new and exotic places. I would like to be able to lie on the beach, seeing clear blue sea and white sands.  I want to enjoy a long and fruitful retirement, and the earlier I retire the more I can see and do.

An example of a bad goal could be:

I want to retire early with a good pension. This is because I don’t like working. But I cant stop working if I don’t have enough money because I will be poor and unable to live a good life. I don’t want to watch tv all day, and I dont want to retire too late in case I die young.

The first goal is specific, positive, for your benefit, and easy to visualise. The second goal is non specific, negative, and very difficult to visualise.

You should try and visualise your goals for 30 minutes per day. You should try and have between 10 and 20 specific goals at any one time. You should not restrict your goals to what you can easily achieve, but instead have goals which you dream of, and are out of reach because setting your sights too low guarantee you will under achevie.

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