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14 Sept 2012


The BAD way I went about choosing a financial advisor goes:
I was 30, in my managerial "sort of" position, feeling too important like I was a great achiever. I didn't really like my job at the time. I had my first rental apartment with a home loan on it and our home on the second bond. Our house had a nice huge one bedroom cottage at the back. We never even thought of renting the cottage out before my sister asked to move into it after getting married. They rented the cottage for a nice extra income. So we ended up with 2 rental properties.

I hated debt even then. I focused all my energies on paying up the two mortgages. The Mr was paying one mortgage and the one car we owned, whilst I focused on the rental property. Our lives were OK, actually more than just fine. No consumer debt and a great lifestyle. We had no emergency fund, but a few unit trusts and two Retirement Annuities. We were content. The rental income was amazing to have and came in handy for some lifestyle inflation. We lived just the way we wanted. My cosmetics cost more than some other people’s grocery bills at the time. I could “afford” it. But I knew that I could do better and I decided to get a financial advisor from those kinds of financial advisor organisations/ network groups.

When I called the guy, a small girl took my call. I was a bit annoyed. The guy then takes the phone, apologises, mentions that it's his daughter; he works from home. He immediately switches from his dad hat to his professional one and takes my details, etc. In my head I think, what kind of financial planner doesn’t have an office to go to? Is this guy successful enough to give me financial advice? Am I about to make a mistake here?

He comes to my office on the appointment date. He is definitely young, younger than me and doesn't look as uptight as I expected a planner to be. He chose to accept the afternoon as time for this consultation so that he goes to photograph the sunset in one of our heritage sites close by after. He is enrolled with a photography school and his wife is a stay at home mom. He himself works from home, hence the toddler-phone experience a few days prior. Trust me to get all this information from my financial advisor and nothing about his credentials, experience, etc. I was so happy (envious) with his life and thought, “this guy is so HIRED”. He went on and on on how he is making money by living in a construction site. He is a property flipper. Well, sweet, I thought.

The guy analysed my finances and in a few days sent me my report. 9 years later, I still have the hard copy report I got from him. I didn’t like his report at all, but the sophistication of having had a financial planner made me feel so middle class (or higher), for real. What I got from this exercise was that, “LIFE CAN BE SO MUCH MORE EXCITING”. The guy looks happy, likes what he does for a living, he seems wealthy enough, even throws in some photography lessons and has his 3 year old daughter play receptionist. This is life for sure...I kept thinking. My kids were both below the age of three, one in day care and one with the nanny at home. I felt guilty like most mothers, but felt that its like that with everyone, until I met the financial advising guy.

What I didn’t like from the portfolio proposal was that, it was full of policies I needed to buy to fill the gaps in my portfolio. I knew for sure that this guy also sells policies from one particular SA insurance company. I didn't like that he didn't declare his interests. He might not have been objective. But talking to the guy changed my life for the better. I needed the wake up call. This guy’s lifestyle gave me just that. He was building wealth, spending time with his family and enjoying every minute of it in his 20s. I tried to dismiss that it was possible to live like that before 30 by assuming that he inherited some of his wealth. That made me feel good for a while, but I had to shake that off and start working on my own financial issues. By the way, all what you read above is the best way NOT to get a financial advisor, but below is a better way TO.

Choosing a Financial Advisor

  1. Always remember that the financial advisor may be having a lot of hidden agenda. He also has to live, RIGHT. If he sells some financial products, he may just be marketing those. But really, there are great financial advisers who give genuine advice whilst they also recommend products and get commission from them. Keep in mind that you are your best financial planner with your best interest at the end.
  2. Be sure to get someone experienced and trustworthy by asking the right questions. People with professional affiliations are a better bet. Also get some references from the person and actually call them. Ask him to declare if he sells some products and what his/her fee actually covers. You really need to be assertive. It’s your life and you are the one responsible for it.
  3. Get some personal finance knowledge prior to getting a financial advisor. Investigate where you need help in planning your future. Being blank about your own life is too dangerous. Read books, even blogs help. Look at how others do their stuff and see what can work for you. Bloggers do keep it real. It’s inspiring to see how people got out of their debt and carry on to build wealth. 
  4. Know your risk tolerance level. Not everything a planner suggests is right for you. We all differ and a good advisor will know how far you can go with your investments. 
  5. Finally, follow your gut and when things don’t feel right, they usually are not right. Analyse the help you get, and if the advisor recommends certain products, check the amount of commission that the product gives to the advisor. It might still be a great product, but it helps to know that the planner is not only driven by the commissions he gets. You may even get the financial product comparisons online.

If I were to choose a financial planner, I would try to get one who charges a flat fee. I believe in choosing the financial adviser who does not sell any products (hope those still exist). But fortunately for me, I am convinced I don’t need any serious money advice for now. A little casual comment from readers and personal finance bloggers will do.
How about you? Do you have a financial planner?


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