When it comes to choosing a good financial adviser, it is important to find someone that you trust, shares your investment ethos and who has experience investing for someone at your stage in life.
Whether you are nearing retirement or just starting your investing journey, asking these five questions will help you find the right adviser with whom you can build a good partnership.
Who is the adviser’s ideal client?
It is important to understand who their ideal client is, the market in which they operate and if that is for you. For example, if you are in pre-retirement, you want an adviser that has experience in this area as they will be more familiar with your needs.
Choosing someone who has experience with your life stage will also guide how they interact with you. For example, advisers dealing with younger clients are more likely to embrace video and other digital platforms.
You need to feel comfortable with how an adviser communicates with you and that you can understand and use the information presented.
What is the proposition?
You need to understand what areas the adviser is most comfortable with, their particular areas of expertise and how innovative and open to new areas of advice they are.
It is also crucial to understand their approach to ongoing advice, and if that resonates with how you want the relationship to evolve.
Other things to consider include how often they communicate with you to show how your investments are performing, how receptive they are to you contacting them and what you can expect from your review meetings.
What is their investing approach?
What is the adviser’s approach to driving income, growth and managing portfolio risk? For example, if your investment goal is to generate income, you should choose an adviser that can target this. Conversely, if you are happy to forgo returns to manage your risk more closely, an adviser that understands this is paramount.
Active or passive investments?
You should know the adviser’s investment philosophy for active or passive investments. Some advocate passive investments, such as index funds, while others favour actively managed portfolios.
Preferences for passive or active investments have an impact on costs, potential risks and returns. An adviser should be clear about these when discussing investment options.
Another thing to consider is how an adviser manages cash in a portfolio.
While returns from cash are negligible right now, it does have a role to play in a diversified portfolio. Asking about an adviser’s approach to cash can give you an idea into how they manage portfolio risk.
Listed or unlisted investments?
If liquidity and transparency of holdings is important to you, an adviser comfortable managing portfolios made up of assets with these characteristics may be more appropriate for you.
Holding listed and unlisted assets may have different tax and cost implications and may also impact the regularity of reporting. The adviser needs to have experience managing these in a way that is appropriate to your portfolio and life stage.
Working with a financial adviser is a partnership and asking these questions of prospective advisers can help you decide if you can work with them and trust them with your money.
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