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.
IMPORTANT NOTICE: This document is published by Lonsec Investment Solutions Pty Ltd ACN 608 837 583, a Corporate Authorised Representative (CAR 1236821) (LIS) of Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research). LIS creates the model portfolios it distributes using the investment research provided by Lonsec Research but LIS has not had any involvement in the investment research process for Lonsec Research. LIS and Lonsec Research are owned by Lonsec Holdings Pty Ltd ACN 151 235 406. Please read the following before making any investment decision about any financial product mentioned in this document.
DISCLOSURE AT THE DATE OF PUBLICATION: Lonsec Research receives a fee from the relevant fund manager or product issuer(s) for researching financial products (using objective criteria) which may be referred to in this document. Lonsec Research may also receive a fee from the fund manager or product issuer(s) for subscribing to research content and other Lonsec Research services. LIS receives a fee for providing the model portfolios to financial services organisations and professionals. LIS’ and Lonsec Research’s fees are not linked to the financial product rating(s) outcome or the inclusion of the financial product(s) in model portfolios. LIS and Lonsec Research and their representatives and/or their associates may hold any financial product(s) referred to in this document, but details of these holdings are not known to the Lonsec Research analyst(s).
WARNINGS: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to general advice and based solely on consideration of the investment merits of the financial product(s) alone, without taking into account the investment objectives, financial situation and particular needs (“financial circumstances”) of any particular person. Before making an investment decision based on the rating or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances or should seek independent financial advice on its appropriateness. If the financial advice relates to the acquisition or possible acquisition of a particular financial product, the reader should obtain and consider the Investment Statement or the Product Disclosure Statement for each financial product before making any decision about whether to acquire the financial product.
DISCLAIMER: No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this document, which is drawn from public information not verified by LIS. The information contained in this document is current as at the date of publication. Financial conclusions, ratings and advice are reasonably held at the time of publication but subject to change without notice. LIS assumes no obligation to update this document following publication. Except for any liability which cannot be excluded, LIS and Lonsec Research, their directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this document or any loss or damage suffered by the reader or any other person as a consequence of relying upon it.
Copyright © 2022 Lonsec Investment Solutions Pty Ltd ACN 608 837 583 (LIS). This document may also contain third party supplied material that is subject to copyright. The same restrictions that apply to LIS copyrighted material, apply to such third-party content.