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Getting a Financial Advisor? These Are the Important Questions You Should Ask

In Singapore, chances are, everyone knows at least one financial advisor (and quite often more). Most of us have gotten that unsolicited WhatsApp message from a “long-lost” ex-classmate asking you if you’re free for coffee. More often than not, you could hazard a guess as to what they want to “catch up” about.

Despite the generally negative connotation attached to the term ‘financial advisor’, the understanding of what an FA really is can vary, depending on who you are speaking to. It can be a licensed insurance agent, an investment banker, or a certified estate planning practitioner.

Essentially, an FA uses their financial knowledge and expertise to construct customised financial plans that help to safeguard and grow their clients’ finances. Hence, having a trusted FA to handle your insurance and/or investment needs can be very helpful to you.

However, the journey to engaging an FA to help you with your financial planning can be one filled with uncertainty. Many people are often confused as to who to approach and trust with their hard-earned money.

In this article, Planner Bee will help guide you through the murky waters and help you know what to be prepared with before meeting a new FA, as well as the important questions to ask.

Before meeting the financial advisor

Although you are relying on the potential FA for their expertise, there are certain things that you will need to prepare before you arrange a meet-up: 

1. Your spending and budget

It is helpful to have an idea of what you are spending on and where. Look at your expenditure from the last three months and note how much you spend monthly on fixed and variable expenses. This will also let you know how much you can budget for investment and insurance without struggling.

Read more: Create a Personal Budget You Can Actually Stick To

2. Organising your existing policies

Knowing what your existing policies are will help you determine your shortfall in protection and/or investment.

3. Insurance and/or investment policies that you are curious about

Rather than be a blank sheet of paper on the day you meet the potential FA, research and know more about the investment or insurance that you are curious about. Have a list of questions about the policies to ask the FA when the need arises.

4. Your investment goals

Write down both long- and short-term goals so you can better plan your investments around them.

Meeting the advisor for the first time

Now that you have a better idea of your finances, goals, and potential shortfalls, you are ready to meet your potential new FA.

The first meeting is usually a get-to-know-you session. Regardless if they are your friends or an FA who approached you during a roadshow, it is important to use this meeting to know their background, expertise, and how they can help you with your investment and insurance needs.

During the first meeting, you are building rapport with the potential advisor just as much as they are trying to know more about you. Here are some of the general questions that you can ask your potential FA to know if they are suitable for you: 

1.  What are your professional qualifications and training background? 

This helps you to understand how qualified your potential FA is, especially since you are entrusting your hard-earned money to them. Everyone has different needs, from savings to retirement planning, and it is good for you to understand what the FA is best at. 

2. How long have you been in the industry?

An FA who is in the industry for a long time has more experience with the products they are selling, while a new FA could have more drive (and pay you more attention since they have fewer clients) in servicing their clients.

3. What is your approach towards financial planning?

Knowing the potential FA’s approach towards financial planning can give you a better sense of how they can aid you in your specific financial needs and if they share the same values as you.

This could apply differently for different stages, whether you’re a student, new to the workforce, a housewife, someone who is mid-career, or even a high net-worth client.

Your second and third sessions with the FA

After the get-to-know-you session, you would know if you can identify with the FA. This is when you decide if you want to proceed with the relationship, let them know more about your existing coverage, and listen to their suggestions. This can take place over the next one or two meetings with the potential FA.

If you have organised your existing insurance policies and looked into products that you think you might need, here are some insurance and investment-related questions that you can ask the potential FA during your second meeting:

1. I have XXX illness/medical history. How will it affect my coverage? What do you suggest be done to ensure better coverage?

This will apply especially when dealing with medical insurance, since your medical history and/or chronic illness will determine if you can be adequately covered.

Check if there will be loading (additional premium) and coverage exclusions. Ask the advisor if there are riders or other policies that can give you more comprehensive protection.

2. How will the recommended product meet my investment objectives and risk appetite? 

Everyone has a different level of risk tolerance, which is usually dependent on your financial situation and needs.

Your new FA should make the effort to learn more about your risk appetite, investment objectives, short- and long-term financial goals, and current financial situation before recommending you a financial product. Some advisors will also carry out a financial needs analysis based on your information to better recommend you the right products.

Read more: Questions to Ask Your Financial Advisor During Your Annual Review 

3. What is the track record and what are the charges for this product?

The advisor can show you the product’s information sheet but make sure you get them to put it across in a manner that you can understand. Also, while it can be confusing to read charts and graphs when looking at an investment product, it is a good practice to check on your financial products every couple of months.

Most importantly, make sure the advisor is clear in their explanation with regard to the product’s charges and fees. You do not want to be given a rude shock by any hidden fees that can eat into your profits. 

4. Based on what I have provided, what kind of products do you think I need and why?

While it can be difficult for the advisor to recommend something off the top of their heads, it could also give you a better sense of how experienced they are and how well they know their financial products. There is a higher chance that the less sincere advisors will stick to their rehearsed script in recommending you something that you do not need.

Furthermore, you should always ask the FA why they are recommending you to take up certain products and how they came to the conclusion that you need them. After all, it is your money!

5. What if I want to change the amount of coverage as my needs change in the future? What kind of flexibility do I have? What happens if I can’t keep up with payments?

When you are recommended certain financial products, it is important to know how flexible they are in case your circumstances change and the product is no longer suitable in the future.

Know if you can increase or decrease coverage, the penalties for making changes, and the worst-case scenarios involved with the product. Some financial products allow you to take a premium holiday (a temporary pause of premium payments), extend a policy loan if you need, or even tap into the policy’s cash value to make a partial withdrawal.

In conclusion…

When looking for a new FA, remember you are entrusting them with your money and you should take as much time as you need before making any decision. Feel free to talk to a few different advisors before deciding. Know that you are forging a long-term relationship with the FA as most of the financial and insurance products have long horizons.

If you are confused and want to understand your financial situation better, feel free to reach out and drop us an email at ask@plannerbee.co!

Read more: The Basics of Financial Planning: The Last Step is Key

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