If you’ve been reading my blog for a while, or follow me on social media, you might know that I spend time working on my spending and saving habits as I love me some sneakers, handbags and makeup, and if I don’t monitor carefully what I buy, all I’ll be left with are empty MAC lipstick containers, and nothing in the bag for my retirement and my kids.
In fact, I’m pretty sure that if I hadn’t spent the time guiltily tracking what I spend, budgeting, and setting up debit orders for retirement annuities and savings as advised by the financial advisors I’ve had along the way, I’d be in trouble. I have about 30 or so earning years left, which sounds like a lot, but not when one considers that I need enough to live for however many years after that.
With a financial advisor, I was able to slowly pay off my credit card, which was showing more action than what I could afford. I still wanted all the things, and the repayments and paying so much interest were a rough but good lesson, I suppose, in budgeting and cutting out things if I can’t afford them.
This month is Financial Planning Month, so you’re likely to see many posts encouraging you to get your “finances together” and doing more so that you can one day have more. I guess as a parent, it’s all about trying to instil good habits, so that you have enough for them, and so that one day you’re not financially reliant on them.
I’ve seen the benefits of using a financial advisor myself, and I’m obviously not the only one. According to Liberty’s new research, 70% of people who see a financial advisor are more confident about their current financial position and also expect it to improve significantly in the next five years, presumably due to the advice and guidance they’ve received.
This contrasts with the almost half of people who don’t have a financial advisor and whose financial positions have either remained stagnant, or gotten worse over the last five years.
If you don’t have a financial advisor and are looking for one, here are the questions Liberty suggest you ask them, in order to ensure get the best service and advice:
- What are their credentials or qualifications? This will allow you to gauge their experience and background. You should also ask whether they are a fiduciary, which means they’re legally obligated to act in your best interest by choosing the best product for you, rather than the one which pays them the highest commission.
- How are you compensated for your services? Generally advisors will either charge a fee for their time or will take an upfront and/or ongoing percentage from your investments. It’s important to understand how the financial advisor will be paid and what this will cost over time.
- What type of clients do you specialise in and what is your approach like? Financial advisors often focus on a specific type of client, for example entrepreneurs or parents.
- Can you show me a sample plan? This will show you whether the plans your financial advisor draws up are generic or detailed to your specific needs.
- What happens if I become incapacitated or unable to work? Financial advisors need to not only at your financial health in terms of retirement and savings, but also that you have the correct disability cover in place.
- How often will we meet and review my plan and progress and will I be working with you personally or with a wider team? This is a key part of a financial advisor’s offering and you need to understand whether they will be constantly engaging with you or doing a cursory check-in once a year so that you remain an active, paying client.
My advice, and something I’ve learnt from my own experiences, is to share with your financial advisor what your strengths and areas of growth are (aka weaknesses). My areas of growth are always having insurance, disability and life cover (I’m a sole proprietor, so I don’t rely on a company for this), and my areas of growth are buying things I don’t need, and just putting them on my credit card.
Another thing is to ask, ask and ask. Don’t be bamboozled by big words and promises, and if it sounds too good to be true, then it probably isn’t. I don’t enjoy scare-mongering financial advisors, so I try to stick with a financial advisor who doesn’t guilt me or make me feel terrible about all the money I could have saved, but didn’t.
Good luck, and let me know if you make any changes this month. AND, in the next few days I’ll be running a giveaway with Liberty, where you could win a R1000 Woolworths voucher.