If there is one person you need to have a good relationship with, it is your financial adviser.
This person can steer you to wealth, and to the best investments you can make to become financially stable in life.
October is Financial Planning month, making it the perfect time to do a check in with your financial adviser before the end of the year.
It is also a reminder of the importance of having a good relationship with your financial adviser.
Most successful adviser investor partnerships are less transactional and more relational, therefore those partnerships have the best chance of a positive outcome, said Neal Sinclair, a business development manager at Glacier by Sanlam.
“Think of a financial adviser as a personal trainer, someone to guide you and keep you going when you might feel overwhelmed,” said Paula Walker, a director and advisory partner at the Consolidated Wealth Group.
Jaco Prinsloo, certified financial planner at Alexforbes, shares five questions every investor needs to ask their financial adviser.
Am I sufficiently covered?
Like insuring a car against a loss or damage, people also need to insure their lives as well as their ability to generate an income.
Prinsloo said that a financial adviser can assist their clients in setting up a personal insurance policy to protect them against the loss of life or income.
“You can use the proceeds from the policy to replace your income or take care of your loved ones when you are no longer here to provide for them,” Prinsloo said.
“A good financial adviser will also warn you if you are over-insured, as this leads to paying unnecessary premiums which could be better used elsewhere.”
Am I invested according to my risk profile and goals?
It is vital that investors know what their risk profile is so they can determine their risk appetite to reach their investment goals.
According to Prinsloo, a financial adviser can help investors find a balance between their level of comfort and their investment goals.
Sinclair said it’s a myth that an investor’s appetite for risk stays the same for their entire career of investing, so if the appetite changes the portfolio needs to change with it.
“If you’ve fallen out of your appetite for risk, it’s important to discuss this with your financial adviser so you can manage this appropriately,” Sinclair said.
Are my investment goals on track?
Prinsloo said an investor’s investment returns must be secondary to their goals.
Investors should speak to their financial adviser to give them a future cash-flow projection for their goals to see if they are on track.
“Although the projection is just an assumption, it will give you a target to aim for. In addition, if you need to make adjustments, your financial adviser can help you find a cost-effective and tax-efficient solution to meet your investment goals,” Prinsloo said.
What fees am I paying?
Investors may believe that there are no costs or fees associated with their investments. However, there are costs involved with reinvesting dividends and issuing statements as well as buying and selling shares.
Prinsloo said: “Ask your financial adviser what your effective annual cost (EAC) is. This will show you the total cost of managing your investment. If you are paying above the industry average, ask your financial adviser to help you to explore alternatives.
“With investments, you get what you pay for. So do not always look for the cheapest option – look for the option where you believe you could get the most value for your money.”
How is my financial adviser doing?
People should not be afraid to question their financial adviser on any developments with their portfolio and the potential impact it can have on the investor.
“An informed decision will give you the trust and confidence to act on any advice provided by your financial adviser, as you know it is the best for you,” Prinsloo said.
He said that a financial adviser can save investors from making emotional decisions and provide them with the support to reach their goals.
“Schedule that meeting with your financial adviser – and if you don’t have one as yet, there’s no time like the present.”
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