I often wonder what or who makes the perfect financial planner or adviser. Is it someone with a straight moral compass and QFA designation. Is it the stereotypical brown leather briefcase and a couple of decades of experience in the industry?
Where your financial adviser comes in
To accomplish your goals, you may need a skilled professional with the right licenses to help make these plans a reality; this is where a financial adviser comes in.
Together, you and your adviser will cover many topics, including the amount of money you should save, the kinds of insurance you should have (including long-term care, term life, disability, etc.), and estate and tax planning.
The financial adviser is also an educator. Part of the adviser’s task is to help you understand what is involved in meeting your future goals. The education process may include detailed help with financial topics. At the beginning of your relationship, those topics may include budgeting and saving. As you advance in your knowledge, the adviser will assist you in understanding complex investment, insurance, and tax matters.
Step one in the financial advisery process is understanding your financial health. You can’t properly plan for the future without knowing where you stand today. Typically, you will be asked to complete a detailed written questionnaire. Your answers help the adviser understand your situation and make certain you don’t overlook any important information.
Creating The Financial Plan
The financial adviser gathers your personal information at the initial meeting, commonly known as “Fact Finding”. All of this initial information is used to build a comprehensive financial plan that will serve as a roadmap for your financial future. It begins with a summary of the key findings from your initial fact finding and summarizes your current financial situation, including net worth, assets, liabilities, and liquid or working capital. The financial plan also recaps the goals you and the advisor discussed.
The analysis section of this plan will provide more information about several topics, including your risk tolerance, your need for insurance, be it Life, Serious Illness, Mortgage Protection as well as Pensions and Investments.
Based upon your expected net worth and future income at retirement, the plan will create of potential best and worst case retirement scenarios, including the scary possibility of outliving your money. In this case, steps can be taken to prevent this situation transpiring. Additionally, if you are married or in a long-term partnership, the plan will consider survivorship issues and financial scenarios for the surviving partner, with tax efficiencies being of utmost importance.
Helping You Reach Your Goals
Financial advisers can assist you with investing and reaching your long-term goals in many ways. The key to achieving such goals is discipline and time. When a plan is put in place to achieve X,Y and Z, you must have the discipline to stick to it. The second being time, this is any investors greatest asset, as discussed on my previous blog, its “time in the market not timing the market”
Financial advisers know more about investing and managing money than most people. They can guide you to better choices than you might make on your own. In a world where answers are at the tip of your fingers with the internet, the value of having a qualified financial advisor cannot be denied. For context, financial advisers play a similar role to personal trainers. Yes, the answers are available on the internet, however the value of having someone to take the pressure away from financial planning and holding you accountable is invaluable for your financial future and well being.
Financial advisers help keep you on track by talking you out of making emotional decisions about your money. For example, buying a stock that’s been skyrocketing or selling all your stock funds when the market plummets. Just think back to those friends who thought buying Pfizer was the investment opportunity of the decade ….
It’s in the name, financial advisers can make suggestions about the best strategies to implement to improve your finances. This can include everything from what investments to make to what insurance to take out.
As your life circumstances change, a financial adviser can help you adjust your financial plan so that it always fits your current situation. The greatest tool in modern day financial planning is the cash flow forecasting model, for example Voyant.
Many people don’t take the steps they should manage their finances because they’re too busy or too uncertain about what to do. Working with a financial advisor means someone else can handle what you don’t have time for and make sure your money is being deployed in the best way.
If you have read this and it sparks your attention and you would like to find out more on the topic, I can offer two options! Firstly you can contact me directly at firstname.lastname@example.org, alternatively you can continue to follow these series of blogs that will be on the SYS website and check out my profile.