Financial Planning

5 Signs Your Financial Advisor Isn’t Right For You

To assist you in your financial planning needs, you may wish to engage the help of a financial advisor. A financial advisor is a licensed professional who is able to provide personalised financial advice, best suited to your financial needs and circumstances. While financial advisors are legally required to act in your best interests, there are times where they may fail to do so and therefore may be unsuitable for you. Read on to find out more about choosing a financial advisor, and the 5 signs that your financial advisor isn’t right for you.

1. You do not fit into their usual client base

Before choosing a financial advisor, you should consider the type of clients that they typically work with. It is best to select a financial advisor who deals with clients who have similar financial issues and goals to you. In making this assessment, consider the typical age, stage of life and income levels of the financial advisor’s other clients. For example, if the financial advisor’s client base primarily consists of young clients but you are nearing retirement, they may not be a suitable choice for you.

2. They fail to obtain all the relevant information about you

When giving personal financial advice, financial advisors must take into account your personal situation before making any recommendations. The more information the financial advisor has, the more equipped they are in providing the best advice to match you personally. Here are some typical questions you should expect your financial advisor to ask:

  • How much money do you have available to invest?
  • How much money do you need to pay off your debts and expenses?
  • How long do you want to invest for?
  • How much risk are you prepared to take?
  • Are you intending to continue to work?
  • How much are you earning and how much are you spending weekly/ monthly?
  • What are your family circumstances?

Before you act upon any financial advice, you should ensure that it was given in light of your financial and personal circumstances and that it will help you to achieve your financial objectives and goals. Financial advisors are under a legal obligation to give advice only if there is a reasonable basis underlying the advice. Therefore, if you believe that your financial advisor has not adequately collected all your relevant information before making a recommendation, then they may be negligent and unsuitable for you.

3. They recommend products that are too risky for you

Risk profiling should be undertaken by the financial advisor during the initial stages of the financial planning process, before any advice is given. A risk profile identifies and measures your attitude to risk and the level of risk you are comfortable with. Risk tolerance is specific to each person and will vary among individuals.

This risk profile forms the basis of the financial advisor’s recommendations, and therefore any failure to undertake risk profiling or failure to consider a risk profile before giving advice can constitute as financial negligence. For example, if a financial advisor recommends substantial investment in one product rather than a balanced and diversified strategy, or they failure to consider how a strategy may impact your retirement (particularly for older investors), this is risky behaviour which may be considered negligent.

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4. Their services are too expensive for you

Before deciding on a financial advisor, it is best to know the costs associated with receiving their advice and whether you are willing to bear these costs. The cost of engaging financial advisors does vary, and some will be more expensive than others. It is best to shop around and find a financial advisor whose costs you are comfortable with. For ease of comparison, ensure that your financial advisor states any costs in dollar figures, rather than as a percentage of investment required.

5. They do not communicate with you

If you have agreed to receive ongoing advice, you financial advisor should inform you of how they will communicate with you to keep you updated on your financial situation, and when you should expect to hear from them. This may include regular reports being sent to you, as well as regular reviews with your financial advisor. If your financial advisor fails to keep you updated, or fails to respond to your phone calls and emails in a timely manner, this is a great indication that they are not right for you.

Making a financial negligence claim

If you believe your financial advisor has been negligence, you may be eligible to make a financial negligence claim against them. A financial negligence claim is a claim for compensation for those who have suffered a loss as a result of wrong, misleading or negligent financial advice.

 

For more information about making a financial negligence claim, contact Schreuders today.

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