Good advice from an experienced, well-informed adviser can help people save money, protect against risk, manage debts, grow assets, reduce tax liabilities, plan for retirement, identify entitlements for government benefits, and plan what inheritance is to be left to the next generation. A financial adviser’s first responsibility is to the client, not to an employer, a product manufacturer, to him/herself or to anyone except the client.
When providing personal financial advice an adviser must take into account the individual client’s circumstances and goals. The advice may or may not involve the recommendation of a financial product. The role of a financial adviser is not to sell financial products.
The difference between general and personal financial advice:
• General advice – is advice on financial products that helps people make decisions about money but does not take personal circumstances into account.
• Personal advice – considers a person’s objectives, financial situation and needs. With this understanding, the financial adviser can recommend appropriate strategies and, when required, appropriate financial products to suit individual needs and goals.
Who can give advice?
To provide financial product advice, a financial planner must be licensed by the State and is monitored by the SEC. The SEC consumer website allows people to check who holds a license or is an Authorized Representative.
The various watchdog agencies set minimum education standards. Advisers working for a broker will often operate in a support or administrative role and be supervised by an experienced practitioner or principal.
To be certified, financial planners must meet education and examination requirements, hold relevant and approved experience, and adhere to a Code of Ethics. Many are required to renew their certification annually and undertake continuing professional development.
What advice will cost:
Financial advice is a valuable professional service which carries a cost. The cost depends on the complexity of the client’s financial situation and the level of service provided by the financial adviser. On average, a basic plan can range from $500 to $1,000, a typical plan is $1,600 and a complex one can be $2,000 or more. If the advisor is managing assets for the client the fee would be a percentage of those assets.
The Advisor’s marketing materials and ADV part II (provided to prospective clients) explains the services offered and their costs.
The Contract / Agreement (which is the recommended financial plan for the client) details all the specific fees and charges payable to the planner based on the advice given.
When advice is needed:
Most people choose to see a financial adviser at significant turning points in their life. They may need a professional to help them consider their options and to understand financial products, tax laws or the benefit system. Once people find an adviser with whom they’re comfortable, a long-term relationship often develops with regular meetings to review changing needs. People most often consult a financial planner when:
• Starting work or changing jobs and looking at annuation options
• Getting married, or separating from a partner
• Starting a family, and saving for education costs
• Buying a house, or paying off the mortgage
• Looking to invest for capital growth
• Planning to retire
• Inheriting money, receiving severance payments or other lump sum payments.
What a financial planner does:
A financial planner sets out to understand each client’s different needs and financial objectives and to recommend an appropriate financial strategy.
There is an established six step financial planning process which all professional advisers follow with every new client:
1. Gather financial information about the client
2. Identify financial and lifestyle goals
3. Identify any financial issues
4. Prepare a financial plan
5. Implement the plan
6. Review and revise the plan at regular intervals, or when circumstances change.
How to tell if you’re getting good advice:
Good financial advice makes the most of the assets a person has, helps to build assets, provides financial security and brings peace of mind. Some signs of good advice, and some warning signs, are listed here.
• Takes account of personal needs and goals
• Puts the client’s needs first
• Is provided in clear and understandable terms
• Is explained verbally and in writing (through the plan)
• Includes strategies and solutions not otherwise known to the client
• Clearly identifies costs which are openly discussed and explained
• Explains conflicts of interest which may influence the adviser’s recommendations
• The adviser is not employed by or does not represent a licensed advisory business
• The adviser does not identify the client’s needs/goals
• The adviser does not adequately explain the complexities or is otherwise not understandable
• The adviser does not provide an ADV Part II at the first client meeting
• The adviser promotes a product without explaining the risks
• The costs of advice are hidden in the small print and not explained clearly
• An unexpected call is received from an unknown person selling advice or products
How advisers are paid:
Financial advisers charge for their services in a number of ways. Clients should discuss and clearly agree costs with their financial adviser. Some financial advisers receive payment directly from their employers, others from the providers of products in which the client invests. Payments received from the product provider are generally referred to as commissions.
Other financial advisers charge a fee directly to their clients for the service provided. The fee may be fixed dollar amount or based on an hourly rate. A combination of both methods is used by many financial advisers.
In addition to the initial advice fee, other costs may include:
• An implementation cost, based on a percentage of assets invested
• An ongoing advice fee (sometimes in the form of a commission paid by the product provider to the financial adviser).
If you would like to meet with a Peak Financial Partners adviser to develop a financial plan for your family, please call us at 1-614-542-7242; or send an email firstname.lastname@example.org.