Monday Morning Money Moment: August 21, 2017
Financial Advisors: What do they actually do?
As you may notice in my many posts, there exists a lot of confusion surrounding the topic of personal finance. This leads many to seek out the help of a professional in the field to aid them in their journey. The Financial Planner is the standard in the industry for helping individuals, families, and businesses plan for their futures. Despite the wide use of Financial Planners and Advisors, many people still don’t know exactly what these people do. The fault of that lies on the industry itself as they often don’t provide enough clarity on the services they provide. This week at Budget Boss will be dedicated to the Financial Planning Industry and Financial Advisors. My hope will be to provide a little more clarity to the industry I am a part of. Financial planners and advisors have many roles but their main role should be supporting you and helping you accomplish your goals. In this post, I will describe four things that your financial advisor does that can aid and help you accomplish your goals in life. This should help people in deciding whether they need an advisor or if the one they have is up to snub.
1) Clear the Confusion: Education
Most people have no idea the tax implications of their retirement portfolio. Things like Management Expense Ratio, morbidity rates, estate taxes, and net asset value per unit can even confuse many within the industry. One of your advisor’s duties is to explain what these terms mean in plain words and most importantly how they relate to you and your situation. Your meetings shouldn’t be as in depth as the schooling they went through, but it should explain clearly all the things that pertain to you. For some odd reason, the financial industry likes to make things far more complicated than they need to be. Using ambiguous terms is their way of doing it. One of the main purposes of your financial advisor is to break things down into simple, easily explained terms so that you can understand what you are investing in and how you are protecting those investments. Leave the confusing stuff for Bay Street and Wall Street and let’s get to basics.
2) Helping you know yourself
Education is key but so is understand yourself and the implications of your current actions. Many of my clients approach me with the aim of knowing they are on the right track. Sometimes I am very happy to say, “Wow great job, you are doing amazing work.” More often than not it becomes my job to point out things that could be hindering them in their quest for financial freedom. More important than knowing the world, is knowing how you fit into that world. We all have habits and tendencies that may be hurting us in the long run and it is your advisor’s job to point that out. I know my financial picture became a lot more transparent when I opened up to an advisor. It made me accountable to someone other than myself for my actions, which is what I needed greatly at that time. Most of us know what we should be doing and we just need a push in the right direction to be doing it.
3) Planning
Once you understand yourself a little better and understand the industry a little better it is time to make the financial plan that suits your needs. This plan should be based strictly on “Goal Oriented Planning.” What that means is that it follows the goals you have in life and shows you exactly how to get there. Some of these goals may be homeownership, education for the kids, vacations, leaving a legacy, protecting your family in the case of injury/illness/death, investment growth, emergency savings and much more. During the initial fact finding phase, it is the advisor’s job to find out as much about you as possible so that they can make the plan to suit your needs. They should present the plan in fine detail and clarity so that to ease your fears. Once implemented, following up and tracking the progress of the plan is vital. Life throws curveballs, so meeting on an annual or semi-annual basis is vital to staying on track. Adjustments will have to be made so be ready for an evolution of your personal financial plan.
4) Access to the Experts
I like to think of myself as a wealth of knowledge. One thing I do know is that what I know pales in comparison to my team. I have over 200 years experience on my doorstep waiting for my questions. It is these people who I rely on to make the financial plans for my clients. Your advisor should work with a reputable company that has numerous people working as support staff for their advisors. It is these people that will provide the real solutions to the problems you may be facing. Think of the Advisor as the connector to these experts that can manage any situation. I rely heavily on my team as I know it is impossible to know everything there is to know in the vast world of financial planning. All plans should be handled with care and combed over by several experts in the field. The advisor’s job is to make sure you have this access and that they are there for you when you need them. Be wary of anyone who claims to know everything, chances are they don’t.
I know that I have a tough job. It is essentially a job in the customer service field with a financial twist. We shop at certain stores because we know them and we trust them. Your financial advisor should be no different. Trust is the key factor in dealing with an advisor as it dictates all the points I discussed today. You have to trust that they will do their due diligence, educate and not bamboozle you, plan in your best interest and not theirs and use the team around them to help you succeed. They must develop and then maintain the relationship so that when things are confusing and even scary you know what to expect. It can be challenging for many to create their own financial plan, and this is where the advisor comes into play. Just like at your job, there are some people who work hard and care about the work they do, and others who don’t. Make sure your advisor is one who is dedicated to you and your family. Also, make sure they provide these 4 building blocks of a solid financial planning practice.
Fiduciary Advisor: Someone who is obligated to have your best interests in mind when advising you.
Thanks for tuning in today and don’t forget to check out our post tomorrow as we delve deeper into the financial planning industry. If you have any questions about financial advisors please do not hesitate to contact me at joe@budgetboss.ca. Have a great day friends!!
“Education is the key to success in life, and teachers make a lasting impact in the lives of their students.” – Solomon Ortiz
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Joseph James Francis is a Financial Advisor (and a Fiduciary). You can find him on various social media platforms and at budgetboss.ca.