If you watch primetime television, it is no longer unusual to see TV commercials of insurance companies. Most asking you to get in touch with their financial advisors, planners, consultants, or agents. While this is good for financial awareness, the above titles, especially “financial advisor” is a catch-all term in the Philippines.
Personal finance expert, Aya Laraya recently reminded investors that there are currently no standards yet and emphasized the importance of evaluating a financial advisor before giving them your hard earned money.
Don’t be afraid to ask the following to your prospect financial advisor:
1. Are you a licensed financial advisor? – not all financial advisors, consultants, or agents are licensed. Although different insurance companies have different ways of training their agents, it is not necessary that they are all licensed and registered financial planners.
Note that unlicensed agents can still sell investment products legally, but choosing a licensed advisor means he/she has passed qualifying processes making it easy for any investor (big or small) to vet or assess their financial planning skills.
You should also know that each type of financial product will require a different license. If your financial advisor is licensed to sell life insurance, it does not mean he is also licensed to sell mutual funds. Asking this first question about having a license may make you feel uncomfortable and become embarrassed to ask BUT it will save you a lot of time from evaluating your financial planner.
2. How long have you been in the trade and who are your clients? – These are good questions to ask and having short term experience is not always a sign of incompetence. At the back of these questions, it is also good to explore the reasons why your financial advisor chose their profession. Note that some advisors have other jobs and are selling financial products as a sideline. There is nothing wrong with this but it may affect their availability and accessibility.
Don’t be shy about the current clients of your advisor either. Names don’t have to be divulged but, the nature, demographics, and characteristics of current clients will help if you fit the personality and competence of your financial planner.
3. How are you compensated or what is your commission structure? – Have you ever encountered an agent who is trying to sell you all sorts of financial products? Many of us have and this is why it’s important to learn how your prospect financial advisor gets his commission. Others will get this by the number of products they sell, percentage of investment, etc.
Knowing this factor will help you assess if the advisor is selling to you a product that fits your financial goals or one that only fits his personal quota. Ouch.
Remember that commissions are not a bad thing, in fact we really have to pay financial advisors to recognize their knowledge, skills, and to afford continuous education related to the financial industry. One thing I learned is to choose an advisor who will also invest in your future meaning, one that will want you to succeed financially so that both of you can achieve your goals.
4. How accessible are you? – If you’re new to investing on financial products, you probably don’t think you will need to call, text, or email your financial advisor regularly. The truth is, you will and you should. The reason for this is that as life happens – so will the changes in your financial goals.
Sometimes, you will read news or discover a new product on social media and want a quick comment from someone qualified, then you will get in touch with your financial advisor. This is just one of the reasons why you should choose a financial advisor who is accessible and fits the type of communication that you want.
Personally, I don’t like getting phone calls and are more comfortable with email, text, or private message on Facebook. This is how I get in touch with my current advisor and we work very well in this setup.
5. What can you do for your clients in the event of emergency or death? – While some people don’t like to talk about this, it is actually very important especially if you are invested in financial products. Technically speaking, death activates benefits of products like life insurance, endowment, etc. You may know about this very well but in case something happens to you, are your children or spouse equipped with knowledge to claim these benefits on your behalf?
To make things convenient, ask your financial advisor if your family can contact him in case of death or emergency. Ask if he is able and willing to help your family in case this situation happens.
Finding the best financial advisor for you is much like entering a relationship, although not a romantic one – it is important that you find someone whom you can imagine building a long-term relationship with. Personal finance expert and registered financial planner, Aya Laraya highlights four points in choosing your financial advisor:
1. Competence
2. Compatibility
3. Cost
4. Accessibility
Depending on how serious you are with your financial goals, your financial advisor will be a major part of your life. If you haven’t spoken to your existing advisor for a long-time, then chances are it’s about time to evaluate your progress.
Do you have more tips or experience to share about choosing a financial advisor? Please drop them via comments below 🙂
**This post is part of my #Money4LifeChallenge. I wrote this based on my personal experience, and recently I helped my friend find her own Sun Life Financial Advisor to start her financial journey with.
Mommy Lace is a blogger from the Philippines. She started this blog to share information on pregnancy, breastfeeding, childcare, family, and health.
