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What to look for in a financial adviser?

This was originally written and posted by our Group Managing Director Martyn Davies via our sister company MHDWM.


We thought it was a great piece and I am sure if you are living as an expat anywhere in the world you will relate to some or all of the areas discussed. Its a real minefield out there, so please do be careful and do your research.


Do you need financial advice?


The simple answer is if you understand the markets, the complexities of the different financial instruments and have an in depth knowledge of asset classes. Combined with at least 8 hours a week to carry out your research, information gathering and regular review of your investments vs goals. Then the answer is probably no, however if this is not the case then it’s a definite yes, but what and how do you find a decent adviser to give value packed advice?


First of all lets be very clear it is actually much better to have no financial advice than poor advice. Poor advice is a disaster, you would be much better off placing any disposable income direct into an index tracking ETF. Great examples of these would be IVV (iShares S&P500), QQQ (Powershares NASDAQ) or VUKE (Vanguard FTSE 100) to name a few, there are literally thousands out there. These will provide a low cost and steady investment environment that you can simply leave to get on with it. If you are already working with an adviser then you should check your portfolio and check to see your exposure to ETF’s, if you have none then you need to be questioning why that is the case? I would be interested to know what comes back as answers/excuses!


Whatever the answer is, I can almost 100% guarantee you that the REAL reason is that as ETF’s are super low cost investment instruments they provide no opportunity for advisers to earn commissions. They are completely zero commission bearing which is why most advisers and all of the ‘larger’ brokers prefer to place client funds into ‘expensive’ and in a lot of cases ‘poor performing’ mutual funds. Of course not all mutual funds are expensive or poor performing, it all depends on the share class that the adviser or the adviser company is working with. I am by no means anti earning commissions of mutual funds, we all have to be able to put food on our tables, though the strategy should always be to have a decent blend which mixes earning and non-earning products in client portfolios.


We wanted to put together a quick guide on what and how to look for and find decent quality advice that provides value to the client rather than the adviser and the company he represents.


Firstly we always suggest asking your friends, colleagues, wider network for referrals. This is easily the best way to come up with a few options and probably also some guidance on individuals and companies to avoid.


Avoid taking cold calls from financial services companies, these are purely sales organisations. They are very hard to get off the phone, will tell any story under the sun to get the meeting. The ‘largest’ organisation out there will no doubt tell you that you have been referred by one of their clients. However, they won’t tell you who this is over the phone, Mr/Mrs Adviser will tell you at the meeting they want to book. But, surprise surprise if you do meet Mr/Mrs Adviser then he/she will have to check with the office and get back to you later!

Should you succumb to agreeing to a meeting the hard sell will simply continue, high pressure sales tactics to get you to sign up, for in most cases expensive, long term insurance based products.


Financial advice should always be given by a qualified professional who in all cases will work to the pace of the client and not vice versa. Never accept financial advice from a salesperson, the only people to benefit will be the salesperson and the organisation they represent.


Always do your own due diligence, Google is very much our friend these days. You need to do your own background checks on both the company and the individual adviser. Sadly, in a lot of instances you will find these apparent advisers are simply unqualified sales people, a great number of the larger brokers in the industry only recruit sales people from other industries. They then send them on a weeks’ training, which consists of learning your sales pitch and the sales angles required to pressure people into making quick, ill informed decisions.


You need to be able to see that an adviser has a positive track record within the industry, why would you entrust your longer term financial planning to someone that was selling double glazing or second hand cars six months ago?


Unfortunately the downside to internet research is that not everything you see is always the truth, so always seek supporting evidence. If everything is as it seems there should be no issues in an adviser providing, proof of identity, previous employment references, client references and genuine certification supporting qualifications. On the company side of things he/she should be able to provide verifiable evidence of company registration, licensing and regulation. Always remember the adviser will be working for you and you have every right and indeed a responsibility to clarify any and all statements made.


When you do meet an adviser always ask questions, if it sounds scripted it probably is. The script is there to cover up a lack of knowledge. Ask questions on the markets, products you know about, current global issues a decent adviser should have an opinion on all of these and how they could affect any investment activity.

If you are sat in front of a young adviser who doesn’t seem to have a grasp on any of these subjects, then not a great idea to entrust them with any investment activity on your behalf.


Knowledge is key, all qualified advisers will have a rigorous CPD schedule to comply with in order to keep his/her qualification. They will also have a thorough understanding of current affairs and market activity including the impact that current events may have on markets. If you don’t get a good feel for this then move along at double quick pace!


Always ask for references any reputable adviser should have no issue providing these or even putting you in direct contact with a number of their clients that you can talk or email directly.


Last but by no means least and as mentioned earlier in this article. Never deal with non-qualified advisers or companies that are not licensed and regulated to give advice. Again, ALWAYS check this through an independent source. We are well aware of individuals and companies that claim all of these things and even produce certificates to back these claims up. However, when these are checked with the relevant body/organisation these have been found to be falsified.


The adviser should be able to provide these links for you, if not as ever Google is your friend, the main examining bodies for offshore advisers are the CISI and the CII both have areas on their online portals where you can check the membership credentials of advisers.

https://www.cisi.org/cisiweb2/cisi-website/join-us/cisi-member-directory

https://www.cii.co.uk/web/app/membersearch/MemberSearch.aspx


In summary good advice will open up a great deal of opportunities to even the most financially experienced clients. The relationship with an adviser should be looked at as long term and will develop overtime, always bear this in mind when looking for an adviser to work with.


If any of this rings a bell then please do not hesitate to contact me directly, I have included my contact details below. We are always more than happy to set up a 30/40 minute completely no obligation initial meeting. We can provide advice on any current investment activity you may have and also some options if you are looking to start out on your financial planning journey.


I hope you will have found some useful information in this article. Please do feel free to share with friends, family and your wider network.


Martyn Davies ACSI

Email - martyn@mhddistribution.com



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