1. What Is Your Personal Investment Philosophy?
A financial planner may bolster their own portfolio in a way that’s very different from their clients. In many ways, this makes sense. It’s one thing to take risks with their own money, and quite another to risk their reputation along with their clients’ wallets. But once you know about their personal philosophy, you may find yourself with more wiggle room than before. You can ask your planner to make bigger bets relative to your goals. Or you can stick with the same strategy that you’ve always had once you learn about the consequences of bolder moves.
But no matter what, your financial planner should be advocating for a balanced portfolio — one that includes a healthy mixture of cash, bonds, stocks, and term deposits. Each asset comes with its own set of pros and cons, but when combined correctly, can really bump up your return rates.
2. How Do You Make Your Living?
Although this is one of the most awkward questions to ask your financial planner, it’s an important one. If they’re only going to promote the products that maximise their commission, then you may end up investing your money in places that don’t get you the best returns. If your financial planner gets cagey when you ask this, it’s not always a cause for concern. They may be taken aback by the very nature of the question. But if they can’t provide you with a response that meshes with what you already know, it may be time to look for another adviser.
Alternatively, you should also ask how much the planner charges to see if they’re paid a flat rate or a commission. (It’s normal for planners to take about 1% a year of total investments.) Those who are paid a flat rate are more likely to look after your best interests.
3. What Kind of Technology Do You Use?
Banks and financial institutions have been known to rely on legacy systems. (This is usually because leaders fear that upgrading the technology would cause more trouble than keeping it as is.) But some financial planners use robo-advisors to find time-sensitive opportunities that planners may not even realise were available.
Whatever the answer to this question is, you get a sense of how up-to-date your planner is on the latest tools available to them. Robo-advisers can’t fill the role of a planner, but they can strengthen advice and expose new strategies that clients can use to their advantage. If the planner is stuck in the past, it may be time to look for a new adviser.
4. What Are Your Formal Titles?
There are about 5,500 Certified Financial Planner® professionals in the country. This certification essentially means that they’ve gone through more formal study than a non-certified planner. Keep in mind that this additional education doesn’t automatically make them better at their jobs, but it may have given them a better handle on different investment strategies.
In addition to formal certification, you should find out if the firm holds an Australian Financial Services (AFS) Licence. This essentially means that they’re registered with the Australian Securities and Investments Commission (ASIC) and licensed to provide advise.
5. How Long Have You Been Advising?
It may be unfair to new financial planners, but experts recommend choosing a planner who has at least 10 years of experience to get the best results. This is the perfect time to ask about the financial planner’s personal record, how many clients they have taken on, and what type of clients they have the most experience with.
Much like the question about how the adviser is paid, this question may get a little awkward — especially if you ask about any trouble with lawsuits or other legal issues. A good financial planner will be honest with their clients. They won’t gloss over their mistakes, instead focusing on how they’ve used the lessons from those mistakes to become a better planner.
6. What Should I Do with My Liquid Savings Fund?
When a person has accumulated enough liquid savings, their first question they ask is usually what they should do with it. Before blowing it all on a fantasy vacation, a financial adviser can give you a better idea of how to structure your expenses— if and when you do need it. Some people set it aside for emergencies only while others will choose to spend a fraction of it on luxury items.
Australian Bond Exchange: Making Diversification Easy
Australians are overly capitalized in stocks and property when compared with the rest of the world. For your own future it’s vital you find a good financial planner to help you structure your investments. Here at the Australian Bond Exchange we are not financial planners but we work closely with many in the market. So if you don’t have one, we can point you in the direction of the good ones. If you do have one already, we’d be happy to talk to them directly to discover how we can help you reach your financial plans.