Knowing when to seek help is a second step in the solving of any problem. (Admitting the problem is the first step.)
This includes our financial problems, many of which, from unemployment to the collapse of property and pension assets, on how to pay for a college education or how to protect your lifetime¹s savings, are causing many sleepless nights these days.
I¹ve always advocated sharing your personal financial problems with someone who is an expert, ideally, someone with a proven track record who charges a fair fee for their advice and expertise.
Unfortunately, it isn¹t easy to find such a person, especially when the financial ocean is swarming with sharks who are incentivised with bonuses and commissions to generate volume sales. Lesson one: make sure your advisor is impartial, in that they are working for your benefit as well as for their own by accepting your fee rather than the product manufacturer¹s commission.
I only deal with fee-based advisors for the accountancy, tax, legal and investment advice I occasionally need, but in the case of investment advice I accept the reality of the industry that means even if you pay a fee, your advisor isn¹t going to share the losses (though they could lose your
business.) They get their money just like fund managers regardless of whether the investment they recommend goes up or down.
At the end of the day, you¹re on your own. Which is why you need to take ultimate responsibility for your own money. Lesson number two: never act upon advice you do not fully understand or accepts suits you. Accept that the fee-based advisor you trust has only made a recommendation in your interest. You are the only one who decides to follow it.
From January 2013, the Financial Services Authority in the UK will ban commission remuneration for the sale of financial products on the grounds that nearly every financial scandal has been the product of commission remuneration. (It certainly is the case here too regarding the misselling of everything from endowment mortgages, whole of life assurance products, many pensions and most property investments during the boom years.)
Abolishing commission will make the cost of most investment products and financial purchases more transparent and it is hoped in the UK, will reduce the fees charged by product providers.
Until such a ban is implemented here (and there is no sign of it) it is difficult to find a properly trained, experienced fee-based advisor in Ireland. The Financial Regulator declines to provide a list or advisors or to even set their own standard for such a category.
Nearly all advisors quoted in this column and in the wider personal finance press are fee-based; but their experience and expertise and the size of their fees vary. Some specialise in general investment products; others focus on pensions, for example. Some take a very conservative approach concentrating on wealth preservation and management; others focus on capital growth strategies. We seek them out relative to the topic being written about.
Lesson number three: When seeking a financial advisor for your own needs, you need to understand your advisor¹s style and philosophy (as well as their
credentials) almost as much as your own risk profile and motivation.
The Financial Regulator requires all advisors fee-based, commission paid or hybrids to meet certain basic standards before they are licensed.
Recently, however, a new qualification Graduate Diploma in Financial Planning, facilitated by UCD in conjunction with the Life Insurance Association, the Institute of Bankers and the Institute of Taxation, with professional examination set by the independent Financial Planning Standards Board in America has been available to any financial advisors, including tied agents of life assurance companies as well as fee or commission remunerated independent ones.
In July between 30 and 50 of the people who participated in the programme will be awarded the title of Certified Financial Planners by the Irish Financial Planning Standards Board. It is the highest standard of financial competence available here. (It isn¹t known whether their names will be published by the IFPSB.)
It¹s a good start. However, it doesn¹t mean the holder is fee-based or
impartial. You will have to discover that yourself. It doesn¹t mean the person is particularly experienced or that they have a sound investment strategy. Just that they have achieved a high level of competency.
However, a small, like minded group of the graduates, led by Mark Westlake of Goldcore Wealth Management (of which I am a client) are planning to produce a register, based on their credentials as Certified Financial Planners who are fee-based, have achieved a certain number of years experience and who share a common, though not rigid investment philosophy.
The register should be available in July and will hopefully provide sufficient information about each member to help you decide whether they may be a suitable advisor for you.
Getting good, professional, impartial saving and investment advice has never been more important. This new creditation is a start in the right direction.
I¹ll keep you posted on the launch of the register, which will hopefully include an advisor in your area, as it happens.
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