What you should expect from your financial adviser

 

By Daniel Pitaluga, Senior Associate, Abacus

 

It’s no secret that dealing with financial matters such as investments, life assurance or retirement planning, can be complex. Just getting to grips with the language used can be challenging enough. With national governments and financial regulators constantly changing the legal and regulatory frameworks for financial services, professional advice is essential in every aspect of financial planning. It is crucial that you choose an adviser you can trust and is capable of delivering your goals and objectives.

Your adviser should be both qualified and regulated in the field you are seeking advice. You should expect to receive the most suitable recommendation and possible financial solution, personalised to your circumstances.

Listed below are some guidelines that should be considered when seeking financial advice:

 

Qualifications & Regulation

You should always seek advice from a professional who is qualified to the National Vocational Qualifications Framework (NVQF) level 4 and above. These qualifications require rigorous study, are testament that the individual has taken the time, and made the sacrifice to reach the enhanced standard that many regulators require. The Gibraltar regulator, Gibraltar Financial Services Commission – (GFSC) does not impose this requirement but does stipulate that every license holder is responsible to ensure any employees are suitably qualified and that they impose controls to ensure this remains the case. You are within your rights to ask an adviser to show evidence of their qualifications .

It is also imperative that the adviser’s company you decide to engage with is authorised and regulated by a recognised regulatory body. This assures you that the company meets the rigorous regulatory requirements set by its regulator to become licensed. In becoming licensed, the company has undertaken to comply with all directives and regulations issued by its home state regulator and those issued by other regulators in other countries where the license holder may be authorised to conduct business. Such directives and regulations are generally designed to uphold the highest standards of integrity and consumer protection and firms can be heavily penalised (and have their licenses revoked) for non-compliance.

 

Appropriate advice

An adviser can only provide appropriate, personalised advice, once he/she has obtained detailed information about your personal and financial circumstances as well as understanding what your objectives are. You should provide your adviser with as much information as possible and provide him/her with appropriate letters of authority in order that they can request details of any information that you may be missing on any existing financial products, where necessary. The correct diagnosis can be provided only once the information has been analysed. If an adviser attempts to provide you with recommendations without going through this process, you should ask them why. At best, they are working blindly and that may not lead to the best possible results.

 

Cost transparency

One of the main prejudices the public has with financial advisers is that they never really know how much they are paying or whether they are paying too much, or what is a fair and reasonable charge. It is not unusual for financial advisers to be remunerated on a commission basis and receive this commission payment from an insurance company, to then claim their advice is free. If you hear this claim, it should ring a very big alarm bell. You are fully entitled to ask how your adviser is being paid for his/her work and how much they are going to receive. Commissions paid by product providers, are ultimately funded by you as the client (and not by the insurance company as some advisers would have you believe) from your lump sum investment or regular premiums. These commissions are usually funded by way of additional charges to then product your purchase and can be as high as 8%! You should always request a full breakdown of all fees involved in the process including those of your adviser, and any third party product/service providers. When a financial adviser makes a product recommendation, he should always provide you with a product illustration before you commit to proceeding with the application.

 

Simplicity

An adviser’s aim should be to make the whole process of receiving advice as simple as possible. It would be unethical and unscrupulous for an adviser to recommend a solution to a client without them knowing exactly what they are getting himself or herself into. One of the main aspects of this simplification process is breaking down unnecessarily complicated jargon into terms understood by people who are not financial professionals. If you don’t understand something, make your adviser explain it in simple terms. They should have no issue in doing so. It is in their interest as much as yours because it should ensure a happy customer and no surprises which in turns fosters a trusted relationship

 

Professionalism, trust and integrity

One of the most important (if not the most important) aspects of the customer-adviser relationship is trust. However, trust is only earned over time and should not simply be granted because of the adviser’s position in the relationship. A trusted adviser will always act in your best interests, even if this means advising a client against a certain course of action for which the adviser could be remunerated. A good adviser should be willing to prove to you, by his/her manner and performance, that they always have your best interests in mind.

 

Keeping in touch

It goes without saying that a good adviser will be committed to provide a first class service and aim to obtain the best possible results at all times. The adviser should make this a long-term commitment. Circumstances and plans change which are likely to lead to changes to financial plans. A review of your arrangements should be undertaken at least annually.