Creating a financial plan is not complicated; it’s an audit of where you are today, financially, and where you want to be at different life stages. This requires creating a list of what you have, earn, own and owe and deciding to put something aside to cover different goals for the future.
I have met yacht crew who have worked for 20 years without implementing a financial plan, and when they want to leave yachting, they have no pensions and minimal savings or investments, leaving them with a simple choice: live on very little or keep on working.
We can agree that having a financial plan, however simple, is important, but why have (and pay) someone to help you bring this together?
The process: Although creating a plan is quite simple, a financial adviser will ensure that all areas are discussed and re-examined so nothing is left out. All of the horrible “what if” questions should be covered.
Implementation: A good adviser will have access to thousands of products for different clients with different needs. The more choice available, the more assistance you will need in choosing the best ones, but also, the more independent the advice will be. A small advisory firm is likely to have only a few products to choose from and will display less independence.
Professionalism: If we are ill, we go to a doctor — financial advisers have qualifications to diagnose our financial problems and help put together a plan to make us better. And as with a doctor, a financial adviser should have qualifications in his or her trade, even specializing in certain areas.
Regulation: A financial adviser will be regulated by a government body and will have to display a certain competency and have insurance in order to practice.
Knowledge: Qualifications don’t guarantee knowledge; good advisers should continually improve their knowledge and should be able to prove this through their ability to explain complex issues.
Humanity and perspective: Most importantly, you need to trust your adviser. This person or firm should be your trusted adviser for most of your life; they need to be able to empathize with the different situations in which you’ll find yourself over the years. They should be able to draw on experience from other clients to help solve issues you face; they should be able to offer perspective on the decisions you make.
This last point is the hardest to prove and is probably best achieved through a combination of your own gut instinct and referrals from friends and colleagues. Do your own research on all of the above factors, ask around, and keep asking around until you have a short list of advisers to meet. Then follow your own feelings about whether you can trust them; the relationship should be a long-term one, and you will end up telling them a lot of very personal information over time.