The actual role of a Financial Adviser is to assist their clients in making good financial decisions in order to meet their life goals. It involves a process of gathering client financial data, analyzing and then making recommendations so that the client can make informed choices. It does not stop there. The process should also involve implementation, periodic review and monitoring. This is the Practice role of the Financial Adviser, just like attending to patients is the practice role of a doctor. Can you imagine a doctor giving you medicine before proper diagnosis?
It’s a shame that most people’s contact with a financial adviser or financial planner has been limited to an eventual purchase of a financial product. There is more to it than that. The product-pushing practices have caused much disrepute to the profession of a Financial Planner or Financial Adviser.
To advise the client on financial matters, the financial adviser have to be well-trained in: budget and cash flow management, loans and financing, personal and property insurance, personal income tax, retirement, estate planning and investment planning.
While a single financial adviser may not know everything in detail, especially in the beginning, he/she should work towards a Certified Financial Planner (CFP) or equivalent, in order to provide an integrated financial planning solution for their clients. In areas of higher complexity, subject matter experts can also be called in to complement the financial planning process.
To guide the client through the fact-finding process, the financial adviser will have to listen actively, not only to hard facts like income, expenses, assets and liabilities, the financial adviser should understand soft facts like: the value the client places on money, their fears or frustrations in dealing with money and personal preferences about how their finances are to be handled. No two clients are the same.
At the recommendation stage, the financial adviser needs to assist the client in reviewing their situation and make an informed decision to implement any products or services. This requires that a good financial adviser be a good listener and communicator.
Another important aspect of being a Financial Adviser is the knowledge and application of various financial products. Insurance products can vary in design, pricing and application, from simple term policies, to more complicated products like Investment-linked policies. Other features like riders or benefits like retrenchment benefit are sometimes packaged into insurance products. Product suitability varies according to different life stage, risk tolerance, budget, financial circumstance and personal preference.
A good financial adviser should also be well-equipped with a comprehensive understanding of various products and able to match suitable products with client’s needs and wants.
If the financial adviser is offering investment advice, then he/she must also have some basic understanding of how the financial markets work, and be able to act as a counselor to their clients. As investment products are always evolving, a good financial adviser should also keep updated about what products will fit into their clients’ situation and market conditions.
In the next Part, we will talk about the Business aspect of being a Financial Adviser…
Recommended Book about the Adviser Role of a Financial Adviser The Advisor Century: Value Creation in an Entrepreneurial Society
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