Let me give you the best financial planning advice you will ever get in just two sentences. Start early. And invest in assets that generate an income.
There are scores of blogs with advice on personal financial planning and retirement planning. You can find excellent tips on strategies for saving more, optimizing asset allocation and rebalancing, and tax optimisation and succession planning. But it’s those two irrefutable laws that an eight year old can understand that could shortcut a whole industry.
Start saving early, ideally with your parents socking away money in a trust, and you’ll have time and compound interest on your side. Invest in income generating assets – blue chip stocks, bonds and real estate – and you’ll retire earlier and richer than you could dream of. These are simple facts.
But what if that’s not the way things have played out for you? For whatever reasons. What if you had a couple of setbacks or haven’t really gotten started yet? It’s still important to look after your family and you want to have fun in your old age. What can you do?
Well, on the same blogs, you’ll usually read that a key ingredient to success is getting advice from a financial planner or wealth advisor. Usually because that’s what they’re trying to sell but, nonetheless, they’re right.
Big corporates, high net worths, Google, Bill Gates – all rely on expert, professional financial planning. It works. Using a financial planner is worth it.
But with so many different voices out there, with confusing sounding products and exaggerated claims, how do you find someone you can trust and who is right for you? You can start right here.
The only three things you need to look for in a financial planner
1. Indie isn’t just hip, it’s smart. You will only ever get the advice that’s right for you through an independent advisor. I’ll spare you writing that out again but this is hugely important. Independence is absolutely crucial. Any model where a bank is selling its own products or worse is conflicted and it will hurt you. Check out your advisor’s incentive structure carefully and ask yourself ‘what could go wrong?’
2. Size matters. Going with a one man show or a smaller firm introduces unnecessary risk and costs. Smaller firms can’t offer you the flexibility to change or trade up advisors as your situation changes, and they don’t have the same purchasing power with their brokers and banks. Don’t waste your time with small firms or one man shows.
3. Use sticks not carrots. This is the most important tip I can give you here. Any serious firm has strict compliance policies in place that protect you, not just them. The law is much softer on consumer protection than most people think. Just witness the way investors lost billions in the Madoff scandal but the banks and distributors selling subscriptions to Madoff Investments walked away unscathed.
Make sure your advisor is accountable for the suitability of the investments he or she recommends and ensure there’s an ongoing review process. Check this carefully and make sure your advisor is financially penalised for non-compliance.
Actually, there’s a fourth thing
The fact is there’s a lot of competition for your business and sadly not everyone in the financial services industry is focused on your best interests.
You need to find someone you feel connected to and who you like. I can’t tell you who this is but you want someone you can trust and who you can talk with. The only way to really find this is by meeting them personally and discussing your situation with them. Not in a bank branch but in an environment where you are comfortable.
I’m creating these short, easy to read guides to help you get the future you want. Not for living someone else’s goals or lining someone else’s pockets but to help you with the information and the support you need.
I also offer free, independent financial planning advice and I would love to help you too. If you have any questions or there’s anything I could help you with please feel free to connect with me and direct message me here on LinkedIn.
Have a great day!