3 things to consider whether to hire a financial adviser or not
There are 3 things to consider whether a financial adviser may be worth while or not. Whether we have the time, the knowledge, or the willingness to do it ourselves.
1/. Do you have the time?
We are all busy people, juggling many different priorities. Do we have time to analyse our own financial situations on top of that? This is not something that requires a quick analysis either. If we want to successfully analyse our current financial scenario and make plans for the future version of ourselves, this takes a lot of time. If we do not have the time, we need a financial adviser.
2/. Do you have the knowledge?
We may have the time to run our numbers, but may not have the necessarily knowledge. If we do have the time, we may decide to educate ourselves to gain the required levels of knowledge. We can do this by many hours of reading. If we do not have the knowledge, or are not willing to gain the necessary knowledge, then we will be best to get the help of a financial adviser.
Some situations are much more complex than others too. We can gain a lot of information from books and blogs, but sometimes we may need personalised advice tailored for our situation.
3/. Do you have the willingness?
We could have both the time and the knowledge to look after our finances, but we may lack the motivation. If so, then we would be well suited to hiring a financial adviser.
If we aren’t motivated to do it ourselves, then we need someone else to analyse our financial situation on our behalf.
There are two other occasions where you may need an adviser even if you do meet the above three criteria.
An adviser can also be useful if you need some motivation or confirmation. We may have the necessary time, knowledge, and willingness to make our own financial decisions, but we may just need a bit of a push or some support. If we are lacking motivation, having someone encourage us and give tips to press on can be very helpful. To have someone confirm that we are on the right track can also be nice. We may have an idea, but to have confirmation from a professional is very reassuring to our plans.
We must fit all criteria in order to effectively manage our money. If we are lacking in one of the criteria, then it may be a good idea to hire a financial adviser.
WHEN WOULD A FINANCIAL ADVISER NOT BE SUITABLE?
1/. If your budget is tight
I probably wouldn’t recommend an adviser. Wait until you have some more room in your budget. If budgeting is your only concern, then there are plenty of volunteer budget advisers in New Zealand, that won’t cost you a cent.
2/. You are in consumer debt and on a low income
Again, the last thing you want is to be spending money on an adviser. Make use of the free financial mentors in the community.
3/. If you have adequate time, knowledge, willingness, motivation and confidence to manage your own finances
Everyone needs to manage their money. If we are not in debt, or budget deficit, the question is whether we do it ourselves or hire an adviser. This all comes down to whether we believe the adviser will bring us more benefit than they cost.
With the right advice, some advisers can save you hundreds of thousands of dollars. A good adviser should save/make you more money than the cost of the service.
HOW ARE FINANCIAL ADVISERS PAID?
Not all advisers are made equally so do your research before committing.
Commission or fee based
Some are paid by other companies to sell us products such as insurance or investment assets. These advisers are known as commission-based or fee-based.
fee only
Others are paid by the client only. They are not there to sell anything and there is no conflict of interest. These are Fee only advisers. Be careful not to be confused between fee-only and fee-based. There is a substantial difference in how they are paid.
ALL advisers are required to have disclosure statements, so if you need any of this information you can ask for it before getting started. Even better if the disclosure statement is listed on the advisers website as it should be.
TYPES OF FINANCIAL ADVISERS
Not all advisers are created equally.
Some specialise in mortgages; some in insurances; some in KiwiSaver only; some in investments and so on. Others cover more than one area.
To have all your needs covered, you may have to interact with more than one adviser.
I typically cover:
Life and career planning, such as sabbaticals, relocations, impact of kids, and career changes
Investment advice and planning
Retirement planning
If one of my clients then needed specific mortgage rate advice or insurance advice, then they would need assistance from a broker, in addition to the plan I provide.
HOW TO CHOOSE A FINANCIAL ADVISER?
Most advisers offer a free introduction of about 30 minutes. This time is to determine if the adviser is a right fit for you and your goals, if you trust them, and if you feel like they can help. A good adviser should also be honest at this point if they cannot help you, as well as answering any questions you have.
Good questions to ask an adviser may include:
How do you make money?
How many clients do you have? Too many clients may mean less personalised service, but it also means they are popular.
What experience do you have?
Will it be you who completes my work or someone else in the company? The face of the company is often not the person completing your financial report, so be careful of who you get offloaded to.
What areas do you specialise in? If you have a specific question such as retirement or college savings, ideally you would go to an adviser that specialises in one of those fields, rather than a generic adviser.
What services do you offer? It would be nice to get all your needs met by one company, but not always possible. Find out at the beginning.
Tell me about yourself? This question is all about getting to know an adviser on a personal level. You are entrusting them with a lot of your personal information, and you need to know you can trust them and form a good relationship.
FINAL THOUGHTS
Everybody needs planning, but not everyone needs a planner. If we have knowledge, time and willingness, motivation and assurance, we can do it ourselves. Otherwise, a financial adviser can prove to be a profitable investment.
Knowing the best use for our money is critical. If we are missing just one component, I do recommend using a financial adviser. Finding one that is a good match that we can trust, can be a great thing for us and our finances. Make use of the free introductory meetings to find a good match and someone that has your best interests in mind.
A good adviser should always have your best interests as a priority, and this will naturally result in a mutually beneficial relationship where they get paid and you get back much more than you put in. You don't want to feel like just another number. Financial peace of mind can be a well worthwhile expense.
We get check ups for our cars and our health, why are we so reluctant to do the same for our finances?
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here
Comment below. What are your experiences with financial advisers? Are there any other questions you can add that may be helpful for people looking for the right fit?