Meeting a financial adviser are you? Perhaps he or she flagged you down somewhere during their road show. Or a long-lost friend messaged you on Facebook wanting to reconnect. Of course, getting caught unprepared is the worst kind of situation to find yourself in.
Financial advisers come in all shapes, sizes, and level of knowledge. It’s hard to find Mr/Ms Right without asking The Right Questions.
It is your money after all and it’d be a shame if you entrusted it to someone unsuitable to manage your money. Without further ado here are some of the questions (presented in no particular order) that the fundMyLife team thinks you might want to ask.
(By the way, if you ever find yourself meeting a financial adviser outside, don’t let him/her buy you a drink. In social psychology, there is a concept called reciprocity – basically if you let someone do something for you, you’d feel indebted to reciprocate even when it is something that might not be good for you. In this case, having someone buy you coffee tips the balance in his/her favour. So arrive early, and get yourself a venti first.)
Question 1: What is your street cred aka qualifications?
While it may sound like a silly question, it is important to ask what experience and qualifications the adviser has. More so when it is the first time you’re meeting the person. The adviser might have more experience in certain areas. For example, you wouldn’t ask the financial adviser for advice on savings plans if he or she specialises in, say, taxation or retirement planning would you?
Question 2: Why should I listen to your advice?
Given the advice that the adviser has dispensed to you, you shouldn’t neglect asking about his/her track record with the policy. For example, number of clients and contacts of clients who are able to vouch for the adviser.
Not being guai lan (being difficult) or anything, but it is another question to assess the financial adviser’s ability to elaborate on whichever advice that was dispensed and how successful/suitable the policy has been with other clients of the same profile.
More importantly, if the adviser suddenly says something along the lines of “Hey you should listen to my advice – look at its past performance for the past X years, it’s gonna be good TRUST ME” you should stand up, look at him/her in the eye, and say “past performance is not an indicator of future returns”.
And then you turn 180 degrees and walk away. The financial adviser may come off as a warm person, and may even sound genuinely concerned about your financial well-being but the fact remains that feelings are fleeting and $$$ spent is eternal.
Question 3: Why is this policy suitable for me?
You will hope that your financial adviser conducts a thorough fact-finding to best assess your financial situation and what it needs. You will need to ask what kind of policy it is, before signing up for it of course.
Is it a whole life plan, a term plan? Is it savings or investments? Does it fulfil your needs or is it superfluous and you can get equal coverage with less plans? You will also want to know whether the premiums increase as you age, or remains the same throughout. The questions are endless – don’t be afraid to ask.
If you’re advised to drop another policy for this particular policy being recommended, make sure you know why you have to. Even then, you will need more time to carefully consider. Cancelling your old plans comes at a cost, and speaking of cancelling…
Question 4: What happens if I cancel this policy in the future?
Another question people often overlook, which concerns the consequences of cancelling a policy bought in the past. This question is important because in a hypothetical future far far away, you might have a change in heart or mind regarding the policy which you just bought. Perhaps after Googling for a while or upon scrutinising the T&C of the policy you bought you realize you made a mistake. Or another financial adviser assessed your plan and recommended that you cancel the plans you signed up for and go for his/hers instead (gee, the cycle repeats). Or even worse *touches wood* you lose your job and are unable to afford the premiums of the plan.
In these cases, you’ll need to know what will happen to the premiums you’ve been paying for the past X number of months/years. Is it a total loss, or do you recoup some of the premiums you’ve been paying. Or hey, if you’re VERY lucky you might even get to have a premium holiday. Ask not just what you can gain from a gain, but also what you can gain from a loss.
Question 5: How much are you getting from selling this product?
We know, we know. You might think it is rude to ask how much the financial adviser is earning from whatever he/she is selling you. But this is quite an important piece of information that you should factor in your decision-making. Financial advisers have a vested interest to sell you things. Whether the policy in question is something you need or otherwise is a different matter altogether. After all, they might have a family to feed.
Generally, financial advisors are paid based either on sales commission, on a fee basis, or on a percentage of the asset managed. For example, you should ask why an advisor might be pushing so hard for you to take up an Investment-Linked Policy (Answer: Because, maaaan these things earn good commissions for him/her and we’ll cover that further in future articles).
We can almost feel people rushing to the comments section to defend against this point, but it’s important to know how they are benefiting so at least you have an idea why he or she might be so aggressive over selling it.
In short, we prefer rudeness over cluelessness. Any adviser worth his/her salt will be frank and upfront about what they’re getting out of this sale anyway. That’s assuming they’re truthful about it of course. Have a thicker skin! It’s your money after all. If the person looks uncomfortable or dodgy disclosing it, you might want to consider another financial adviser.
Bonus Question: Do you plan to be in this business for long?
During the course of our research, we have noticed that some people have expressed unhappiness over how they as customers were handled when they were passed from one advisor to the next after the original one left the business. In the best case scenario, this advisor is competent and nothing bad happens. In the worst, this new advisor is terrible at managing your portfolio and you end up getting pretty bad advice. Why risk it?
Since you are already being rude (naw no you’re not), might as well take it up a notch further. Ask your potential advisor how long he or she plans to to be in business, and what happens if he or she leaves the workplace. This will determine how things will end up in a hypothetical scenario where your adviser leaves.
Why’re You So Long-Winded/Lol I Skipped Everything
The take-home lesson of this article, our dear readers, is adopting a dollop of healthy skepticism. Your financial advisor might be your friend, your schoolmate from seven years ago, or even an ex/potential lover but don’t forget they too are also first and foremost, human. Vested interest is very real, and you might suffer unknowingly down the road if you do not do your homework.
So do your homework, and make sure you buy the suitable policy that you need. It’s always a good idea to take the folder home and sleep on it before deciding. More so when the adviser said you’d get a hotpot out of signing up for the plan he/she recommended. Ultimately, if you don’t feel comfortable with the person, think long and hard about entrusting this person with your money – chances are that you shouldn’t.
Thanks for reading, dear readers! In our follow up article, we will talk about what questions to ask yourself when considering policies. If you enjoyed what we wrote, like us on our page for more updates and cool reads in the future! Do comment on our page if you want some pertinent issues explored in our future articles!
Have any more questions that you would like to ask? Head on over to our main page at fundMyLife.co to ask our curated pool of financial advisers any questions that you might have. The best thing is it’s free and there are no strings attached!