How to make sure you’re getting good financial advice

If you’ve ever considered working with a financial professional, but you’re nervous or unsure how to find a good one, you’re not alone.

There’s a lot of mistrust of financial professionals, and it’s not totally unfounded. When you combine the horror stories you hear in the news with the fact that many people don’t have the financial literacy to confidently hold an informed conversation with a professional, it makes sense why many people find it easier to avoid financial professionals altogether.

It’s worth taking the time to get the right advice from the right people.Credit: Simon Letch

This has its own problems. If you don’t have the financial literacy to hold a conversation with a professional, there’s a good chance you also may not have the financial literacy to make good financial decisions on your own. This can lead to a situation where external support could be of real benefit, but you’re avoiding it out of fear.

Here are some tips to help you assess whether a financial professional is a good fit for you:

1. Treat it like a job interview. Many financial professionals will have at least the first conversation with you free of charge. The purpose of this session is to find out what you need help with, and give you an idea of what services they offer to help you.

This is also an opportunity for them to put their best foot forward and share what you need to know about their services to feel confident to engage them. Depending on what you’re after, you can usually get quotes or at least rough estimates in this session or sent to you directly after.

Putting a little extra effort upfront into identifying and hiring the right person can save you a lot of pain (and money) longer term.

I always suggest treating this session as though you are interviewing someone for a job (because you essentially are). Instead of taking a passive approach where you just listen to their spiel, do some preparation before this meeting to get clarity on what your needs are and what you’re looking for.

This is going to help you focus on exactly what you need, instead of getting impressed or swayed by all the other information and services they could potentially offer you.

2. Develop criteria for what you’re looking for. Perhaps one of the bigger mistakes I see people making is having no real idea what they’re looking for, and walking into the initial meeting hoping they’ll leave with more clarity.

Spend some time doing some thinking about and researching the following things:

• What specific areas of finance do you need help with? Brainstorm the different areas of your finances (e.g. taxes, insurances, superannuation, investing). Identify what help you need in each of these areas and prioritise which areas are most important to get help with. Maybe you’re OK to manage your own investments but want help with your insurance. If you want help with everything, that will cost more. This will also help you identify the specific kinds of professionals you need to look for, because not all financial professionals can help you with all financial problems. Financial advisers, insurance brokers and accountants all do different things.
• What areas of specialised experience might you want to look for? Think about what areas of your financial life may require specialised knowledge or skills. Some advisers may have more experience with retirees compared to high net-worth Millennials. Some accountants may have more experience working with medical professionals compared to small business owners.
• What is the rough amount you’re willing to pay? It’s a good idea to walk into that first session with an idea of what is usually charged in the industry, as a rough range. Otherwise, you’ll have no idea if what they’re quoting is higher than average. A bit of research online will tell you the common price points for different financial services and that can act as a useful starting point.

3. Scope out a minimum of three different options. One mistake I see many people making is going with whoever they were recommended by a friend or family member without further research. Similar to a job interview, you don’t want to hire the first person you interview without interviewing anyone else.

Even if you love the first person you have a meeting with, you want to do at least a couple more initial meetings with different people to help give you something to compare to.

You’re not just comparing their experience, qualifications, services and fees, you should also be trying to get a feel for their style of working, personality, values and whether you think you would enjoy working with them long-term.

This all might sound like a lot of work but putting a little extra effort up front into identifying and hiring the right person can save you a lot of pain (and money) longer term.

Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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