Financial advisory is a very private affair, and so many people simply don’t have much of an idea of how the process works. And because we’re naturally wary of what is unfamiliar, some of us miss out on this essential service. So let’s go over what happens behind the meeting room door. It really is very simple.
1. Getting to know the advisor and his services, and the advisor getting to know you.
Your first meeting with an advisor is a mutual interview. The advisor, for their part, will usually do the following:
They will seek to understand your situation – both financial and personal.
High-quality financial advice is customized – the key issues and services for a wealthy 60-year-old with three children are completely different from those for a 30-year-old having a hard time saving. So it is essential they understand where you stand.
Depending on the advisor, during the very first meeting they might just seek to get a broad overview and leave the details for a second meeting, or they might plunge into the nitty-gritty right away.
They will explain their credentials, their services, and their fees.
Advisors vary in terms of their backgrounds and services they provide. They will all generally cover financial planning, taxes and investments to some degree, but their focus can vary. For example, one might be specialized in estate planning for wealthy families, while another might be very focused on investment performance while a third might speak surprisingly little about investments and focus more on coaching clients in their overall spending and saving habits.
Some charge fees from their clients, while others receive their fees from the funds and products they invest your money in. Some require minimum investments of millions of dollars, while others work with clients who have US$100,000 to invest.
Some insist that the first step in a relationship be to set up a comprehensive personal financial plan on which other decisions will be based, while others are willing to jump right into helping you with a specific part of your finances without necessarily ensuring that the whole of your finances are coherently structured.
Understand what your advisor does and how they earn their money, and whether this is a good fit for you.
2. Gaining a deep understanding of your situation and objectives
If they didn’t do this in their first meeting, and especially if they have a more comprehensive focus, advisors will seek a deep understanding of your financial and personal life involving issues such as:
How old you are, what you do, how much you earn and how much you are likely to earn in the future.
Your current net worth and how it is invested and why you have chosen to invest it that way.
Where you pay tax, and at what rates.
Your current expenses and their make-up.
Your insurance coverage.
What your current and planned family situation is with regard to spouses, children, parents and other dependents, as well as how their financial situation can affect you.
Your plans and desires regarding things like day-to-day standard of living, holidays, buying property, moving country, setting up a business, changing jobs, and retiring.
Your personal attitudes to finances and risk and your main financial concerns.
3. Presenting and discussing recommendations and a financial plan
Based on your personal situation and concerns, the advisor will make recommendations. Two things can happen that sometimes surprise clients:
First, the advisor may try to help you re-prioritize. In other words, whatever it is that led you to seek out financial advice may not be the most important issue at hand. For example, it is common for clients to seek advice about specific investments when it is clear that, to meet their objectives, they should actually be focusing on readjusting their overall lifestyle and savings, or maybe they are oblivious to the risk of having zero insurance coverage for their dependents. Depending on the seriousness of the point, your advisor can be quite firm.
Another is that financial planning is not an exact science. All decisions involve trade-offs, and there is no single right answer. And you, as the client, have to be fully onboard. So don’t be surprised if, rather than a set of hard recommendations, your advisor is now probing you with gentle questions on how you feel about certain options before putting pen to paper.
4. Implementing the plan
Once a plan is agreed on, your advisor will help you make it happen. This can involve bureaucracy and formal procedures, like requesting pension fund transfers, setting up tax wrappers and vehicles with names like QROPS and picking specific funds and investments. Depending on what you are seeking to do, this could actually take several months. Ask your advisor to keep you informed at each step of the formalities.
5. Monitoring and adjusting your finances
Once your finances are set up in accordance with your plan, your advisor will make any day-to-day adjustments that are necessary over time and will also check-in periodically to discuss how things are going (both on the investment front and in terms of your overall situation) and whether any more significant changes are required.
At the very least, you should have a yearly comprehensive review session, though some like to have shorter meetings as frequently as once a month, which allows for discussion of current affairs that can affect your investments. Even if you don’t meet face to face, you should certainly have access to a monthly statement of how your investments have performed. You should also feel comfortable in contacting your advisor whenever a major issue comes up where you feel you need their input.
In conclusion, financial advisory is very private, but also very down-to-earth and straightforward. An advisor will seek to understand your overall situation, discuss his recommendations with you so that you reach a financial plan you agree on, implement it and then have regular reviews for monitoring and adjustments.