Finding a real financial adviser

IT’S not always easy to find a suitable financial planner. After all, hiring one means giving him or her – a virtual stranger, a bundle of your cash in hopes that it will be managed efficiently.

Nevertheless, if you do decide to engage one, here are some questions you should be asking first before deciding if that advisor is offering what you’re really looking for.

Are you certified?

This should be the first thing that comes to mind if you plan to hire a financial planner, says Jeremy Tan, licensed financial adviser and syariah financial advisory for Excellentte Consultancy.

According to him, there are many individuals in the financial industry who use the title “financial planner” or “financial adviser,” even though they are not licensed either by Bank Negara or the Securities Commission.

“At the same time, they may not have the right qualification and may not be certified by the Financial Planning Association of Malaysia (FPAM) or Malaysia Financial Planning Council (MFPC),” he says.

Success Concepts Life Planners chief executive officer Joyce Chuah echoes this concern.

“Some financial planners have been certified but they are not listed in FPAM’s membership list mostly because they have not paid for their membership fees for some time. Hence, it is important to check on their licence via their membership card or on FPAM’s website.

According to her, the most basic qualification of a financial planner is the Associate Financial Planner Member Certificate or AFPM who must pass Module 1 (Foundations in Financial Planning) in the certification programme.

“On the other hand, the Certified Financial Planner or CFP professional must pass all six modules in the certification programme, namely foundations in financial planning, risk management and insurance planning, tax planning, investment planning, retirement planning and estate planning, and financial plan construction and professional responsibilities.”

Are you a fiduciary?

According to Forbes contributor Laura Shin, a fiduciary is a person who has to place the client’s interest ahead of his or her own.

“Fiduciaries must also disclose what their fees are, how they’re compensated and any other conflicts or potential conflicts of interest that might influence an individual’s decision to use their services,” she says in her article 10 Questions To Ask A Financial Advisor.

“In contrast, non-fiduciary financial advisers might receive a commission in exchange for selling you a particular investment that isn’t the best for you – and not tell you how they’ve profited from it.”

Tan concurs that a financial planner is obligated to act on the interest of the client.

“This is similar to legal, accounting and investment practices, where each of these professionals have a fiduciary obligation to their clients.”

What services do you provide?

Chuah says a financial planner should be able to offer services that are tailored to a person’s specific needs, rather than providing an “off-the-shelf product selection.”

“Rather than trying to sell you a product, a good financial planner will first focus on you and ask questions about what you really want to achieve – your family’s savings and debt, investment goals and risk tolerance, retirement plans, health issues and provision for children.

“The right financial planner should understand your overall situation, offering you unbiased advice on your portfolio and its relationship to your life’s goals, risk management plan and an analysis on your wealth protection gaps, as well as business, tax, legal and succession issues, or even provide references to experts who are in their network.”

Chuah adds that if the financial planner is implementing plans for you, one should ask if he or she has an open architecture rather than a single product to offer.

“Ask also if he or she is offering products from just one company and if possible, if he or she would invest or have already invested, in the very investments that he or she recommends.

“After all, an experienced financial planner is one who has learned through experiences and would walk the talk.”

How are you compensated?

For a fee-based-only financial planner, the client is either charged on a flat fee and may be based on an hourly rate,” says Tan.

“The total fee charged will be based on the number of hours spend in interacting with the client and the time taken to draw up the comprehensive plan.

“For a commission earned basis, it will be paid from the products’ service provider where the client purchases the product based on the financial planner’s advice. In this instance, it is imperative that the client ascertains that the financial planner is acting for the client’s best interest,” he says.

Chuah says most financial planners are either paid by professional fees or commissions they earn from financial products sold.

“Sometimes, it is a combination of both. It is rightfully fair to pay for a financial planners’ services one way or another (since everyone is generally paid for work) but you need to be aware of the charges, how it is paid and if it is levied on an on-going basis.”

What happens if you stop being a financial planner?

It can and does happen. Sometimes, the person managing your finances might just fall ill, get sick, retire or even, god forbid, kick the bucket. So what happens to your money?

“A client will invest in a fund house, so he or she has a direct relationship with that house. So no need to worry that you will lose your money if something happens to the financial planner,” says Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui.

Yap advises that it is best to engage a financial planner that has a team of people working with him.

“It would be a problem if the wealth firm is run by just one person. Best to go to one that has a team of wealth advisers so that if any thing happens, your account can be taken over by another person that practises the same advisory model and philosophy.”

Acclaimed US-based financial advisor Ric Edelman says a client should ask a financial planner how the situation is handled when he is out of the office.

“This can be a real problem if your adviser is a solo practitioner who works part-time (as many insurance agents do) or without any assistants (common for many brokers and agents).

“It’s common for advisers in larger firms to buddy up, covering for each other when one is away. Find out if the advisor you’re interviewing has such an arrangement, but don’t stop there. It’s one thing to know that someone else will answer the phone or respond to an e-mail, they need to be able to do more than merely say, “Harvey will be back on Thursday.”

by eugene mahalingam