This article is first written for Smart Investor Magazine by Marshall
It is very easy to get financial advice, especially during the boom of internet and social media. If you visit financial related Facebook groups or forums, everyone is eager to give their opinion on what is the best way on money management.
However, one downside of these free online advice is the bypass of important safeguards such as ensuring the person seeking for advice is subject to a detailed financial health check and understanding their current financial position.
Choosing your personal financial planner can be one of the most important decisions you make. Your financial planner is your partner to guide you through many decisions about handling major financial and life decisions.
To find the best financial planner who is right for you, here are five important factors to keep in mind:
1. Make a list of financial planners
Start by creating a list of potential financial planners. Ask your friends or family if they have engaged with any financial planners. Take the time to check if the planners have the required license from Securities Commission Malaysia’s database (http://bit.ly/SCFPMY). Then, call each financial planner to see if he or she is accepting new clients and arrange a meeting with the planner.
2. Research the financial planner’s credentials and experience
In Malaysia, most financial planners do not start their career as a financial planner. Some are trained lawyers and accountants. Knowing the background of the financial planner allows you to understand whether if the financial planner have the resources to help you in your financial decision. The more experience a planner has, the better your results are likely to be.
If you need a specific form of planning, such as the involvement of business or family offices, ask the financial planner if he or she has any experience handling the matter.
3. Evaluate the financial planner’s communication style
Choose a financial planner with whom you are comfortable talking. Do you feel that the financial planner understands your situation? Find a planner who shows an interest in getting to know you and will respect your decision-making process.
Also think of the convenience of meeting your financial planner. In the beginning of the financial planning process, you may need to meet your financial planner several times in a month. Can you reach your planner online, especially during the COVID-19 pandemic?
4. Evaluate the financial planner’s company/team
Take the time to research the company and team behind the financial planner. Is the financial planner working alone? What are the credentials of the team behind the financial planner?
As finance is a very broad topic, a good financial planner usually specialises in a particular field and work with another financial planner or other professionals (such as lawyers and accountants) to handle other parts of the planning and solution implementation. Think of it like the case of a hospital, a patient may treatments from different specialist.
5. Understand how the financial planner is getting paid
There are 3 main types of fee-structure:
(i) Commission only,
(ii) Fee-based, and
In Malaysia, we usually see commission only and fee-based planners. Fee-only financial planners are extremely rare.
A financial planner that receives commissions only works great with someone that wants a product that they already have some idea in mind. The relationship is usually transactional in nature and heavily focused on advice with a product-based solution.
A fee-based financial planner earns a fee for developing a financial plan for you, while also earning a commission if you require him or her to service your insurance policies or investment portfolios.
Make sure that your financial planner is transparent about the fee of their services.
Just like making any major purchases, it is important to do your homework. Not every financial planner has the same level of training or offer the same range of services. It is important to talk to several financial planners and choose someone that meets all the above-mentioned criteria.
Finally, it is important to understand that financial planning takes a long process. Find a financial planner that you feel comfortable talking to and feel he or she is helping you work through your problems.