Sunday, April 19, 2009

STI: Wanted: Lifelong financial adviser

April 19, 2009

small change

Wanted: Lifelong financial adviser

Must be trustworthy, knowledgeable about product offerings, and around my age

By Ignatius Low 


One of the problems I have been wrestling with since I started work as a young man has been that of finding a good financial adviser.


Thirteen years later, I still haven't made much progress.


It's one of those items on my 'to do' list that never seem to get done. But with each year that I put this off, the urgency grows.


Although I have insurance policies and some investments in unit trusts and blue-chip stocks, I can't really profess to have a proper financial plan for my retirement.


Being a business journalist, I'm in touch with the latest market developments, policy changes and product innovations - so I could conceivably do my own financial planning.


But I'd rather put myself in the hands of a professional who knows what the various products are in the different categories, and who can also draw on past experience with other clients to offer insider tips that won't be apparent even to the closest followers of the news.


Alas, I haven't found this person yet.


My first financial adviser of sorts was an insurance agent I met when I started work. She was the sister of a friend.


She was young and bright, and impressed me by saying that she was taking all sorts of courses to acquaint herself better with investments other than insurance.


But we lost touch soon after she did a scan of my insurance needs and tweaked a couple of my existing policies to beef them up. She was an avid golfer, and I heard she eventually took up the sport semi-professionally.


The second financial adviser I had was from an independent firm that is not owned by a bank, insurer or stockbroker.


I felt at the time that these IFAs (independent financial advisers) would have a more neutral assessment of the merits of products available in the market.


The financial adviser who was assigned to me was a down-to-earth and humble guy who helped me design a portfolio of unit trust investments for my CPF funds.


He used to be a stockbroker, so we always had lively discussions when we met about what the next great money-making idea was on the stock market.


But when we moved on to insurance planning, there was suddenly a need to talk about more personal details of my private life.


Either I didn't feel comfortable, or he didn't, but the result was that we drifted apart.


Sometimes I don't understand what the problem is. There are so many bank relationship managers and insurance agents out there - all trained to the higher and more exacting standards that the Government and their employers have now come to expect.


The Monetary Authority of Singapore has also, in recent years, issued guidelines to protect consumers, including those that deter financial advisers from adopting pushy sales tactics and others that force them to disclose the commission they are earning for policies and products they recommend.


I've come to the conclusion that while qualifications and conduct are important, what makes a financial adviser valuable to the client must go far beyond that. To me, three qualities are essential.


First, he must be knowledgeable, and there are two aspects to this.


He must keep abreast of the news and know where the markets are headed, especially if you can't or won't do that yourself.


Some of the best financial advisers warned clients of an impending meltdown in Chinese stocks last year, even as new China unit trusts were being marketed. Their clients benefited from a timely switch away from a market that lost more than half of its value in a few months.


A financial adviser must also be knowledgeable in that he should have a good mastery of not just the products he is selling, but of competing ones as well.


Very often, an adviser will come from a bank, insurer or stockbroking firm which has its own in-house products or partnerships with certain product providers.


Test your financial adviser. If you are in the market for a critical illness insurance policy, he should be able to tell you not just why you should buy the product he is recommending, but also what competing brands are offering.


Second, a financial adviser must be trustworthy.


I take this to mean two things - that you always know he is acting in your interest, and that you feel comfortable doing business with him.


Comfort level really depends on personality and whether two people get along is a 'touch-and-go' issue.


A lasting relationship with a financial adviser, however, must be predicated on your willingness to discuss most aspects of your personal and family life with him.


To know if he is acting in your interest, you could ask him how much commission he is making on the various products he sells. But some people find that this sort of directness ruins the rapport they have with their advisers.


Instead, try assessing whether your adviser seems more interested in diagnosing and finding a solution to your problem, or whether he is often trying to interest you in something else which you did not bring up.


This is not to say that financial advisers should not throw up new investment ideas from time to time, but it is a question of balance. And if he is trying to sell you new-fangled products all the time, you have to question his intentions.


Finally, I would say that it is often preferable that your financial adviser be of roughly the same age as you.


There is a practical reason for this: that you will continue to have his services for most of your life.


A financial adviser who is at the same stage of the life cycle as you will also have greater empathy with the financial pressures you are facing.


He may be earning roughly the same salary, or have the same level of savings. He understands the uncertainties of just starting work, the needs of an impending marriage or the burden of raising small children.


In other words, he can better relate to you - and that makes for a greater comfort level when dealing with him.


If I could find a financial adviser with all three qualities, I'd gladly pay a fee for his services.


Call it a long-term investment in a relationship that is clearly for keeps.

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