Do you need a financial advisor?

Financial planning can be a real burden sometimes. So finding someone to do it for you seems like the easiest thing to do right? Here’s some helpful advice.

Unlike previous generations, today most people have to take responsibility for their own retirement needs – the majority of people land up relying on defined contribution plans. This means the employee gets a pension equal to what was invested, plus the growth of the markets. Individuals lucky enough to have a company-sponsored plan still have to know how to choose a strategy and make sure their contributions are enough to cover their retirement objectives.

Why get an advisor?

Trying to navigate the world of investing on your own is a difficult task. We have literally thousands of investment options to choose from and choosing the right mix of investments and risk products is necessary to ensure a comfortable retirement. But making an informed decision requires wide-ranging and current knowledge, which is why good financial advice are so powerfully useful. Anyone who earns a decent income can benefit from the services of a professional adviser.

The key to a successful relationship with your adviser is team work. Though an adviser can guide you in terms of choosing the correct products for your objectives, it is you who has to be committed to a long-term plan. The only way to guarantee true financial freedom is to become a partner with your adviser by educating yourself to the point where you can understand his or her recommendations, explain your needs in detail, and be upfront about your situation.

How to pick an adviser

There are many ways to find an advisor. Both the Financial Services Board (www.fsb.co.za) and the Financial Planning Institute (www.fpi.co.za) carry lists of advisers. Choose a few close to you, and make a few exploratory calls. Explain what you need and ask if they can help you. This is important because some advisers specialise in certain sectors. For example, one may specialise in group investment schemes, another may only deal with clients who have a million or more to invest.

Another way is to ask friends and family if they have an adviser they can recommend.

If you have an investment with a financial services company but have lost touch with the original adviser, give the company a call and ask them to recommend an alternative.

If you have a policy but have never developed a relationship with an adviser, call the company who holds your policy and ask them to give you a list of advisers who work in your area. A relationship with a financial adviser is generally a long-term one, so make sure that you feel comfortable with him or her. When you set up the initial meeting, explain that you will be interviewing a few advisers before you make your final choice.

Play your part

Once you have selected an adviser tell them everything, even if you gamble 20% of your income each month, this will have a significant effect on your plan. There are many life events that will impact the advice you receive. For example, ageing parents that may move in with you, grown kids who periodically come home to regroup, children from previous marriages and over-indebtedness, will need to be taken into account. Half truths and omissions will compromise your long-term goals, as the planner will not be able to make the correct calculations in terms of needs and affordability. If they do not have the full picture, their advice will miss the mark.

Remember, the single biggest obstacle to building wealth is commitment to a long term plan. If you can get this right you will achieve significant wealth.

For more financial advice, workshops and articles, go to Iona Minton's financial blog here.

Have you ever had a financial adviser? What made your relationship with them work – or what made you decide to seek another adviser?

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