A financial advisor is someone that is well versed in all aspects of financial advice, and can help you improve your financial health or solve your financial woes.
The role of a financial advisor in Malaysia is similar to one in many other countries. This individual essentially acts as a medium for better money management on your behalf. Financial advisors understand the regulations, the strategies, and the challenges based on your location and your circumstances.
Since finance can be a tricky subject, and most of us aren’t as well versed in the inner workings of some aspects, support in the form of an advisor can be incredibly helpful. However, it’s important that you choose the right financial advisor for your preferences and requirements. Before that, let’s go over the basics of what financial advisors generally do.
Contents
What is a Financial Advisor?
A financial advisor offers clients financial assistance or recommendations. Estate planning, tax preparation, and investment management are just a few of the many services provided by financial advisors. Financial advisors are increasingly serving as a “one-stop-shop” by offering everything from insurance products to portfolio management.
However, a crucial distinction can be drawn: a financial advisor must genuinely offer direction and assistance. The difference between a financial advisor and a tax accountant, who merely files tax returns without offering guidance on how to optimise tax benefits, is clear.
Additionally, when serving as financial advisors, some stockbrokers or life insurance agents, for instance, might actually just be product salespeople. A true financial advisor should be a well-educated, qualified, experienced financial expert who works on behalf of his or her clients (instead of the interests of a financial institution by maximising the sales of specific products or benefitting from commissions on sales).
Financial advisors are in charge of overseeing all aspects of your financial life, including retirement planning, estate planning, saving, and investing. They are responsible for more than merely promoting financial products and making investment recommendations.
They make a customised financial plan to help you reach your goals after evaluating your financial situation and learning about your financial objectives. They can aid in tax payment reduction and increase the profits on any financial assets you may possess.
First and Foremost, Do Your Research
Make sure you do some research before selecting a financial professional to handle your money. By allowing consumers to look up the professional histories of financial advisors, the industry helps them out a little.
Even if the expert has a disclosure, it might not be a deal-breaker. Consumer complaints about financial planners and consultants do occur occasionally, although they are frequently dismissed or involve personal bankruptcy. Make sure to thoroughly research anything listed before making a choice.
You may refer to our article on How to Select a Financial Planner in Malaysia for more details.
What Financial Services Do You Actually Need?
Choose which areas of your financial life require assistance before you speak with a financial advisor. You should be prepared to discuss your unique money management requirements when you first sit down with an advisor.
The top financial advisor will be able to assist you in setting a route for all of your financial requirements. This can include recommendations for insurance products to protect you and your family, debt payback, financial advice for retirement plans, and estate preparation.
Depending on your stage of life, you might not require in-depth financial preparation. People with relatively simple financial situations, such as young adults without dependents or major debt, may just require assistance with retirement planning. However, those who have complicated financial needs might require further help.
They might be trying to manage challenging debt payment scenarios, set up trusts or college funds for their kids, or resolve challenging tax issues. Determine the services you require and use this information to drive your search because not all financial adviser types offer the same range of services.
You may also refer to our article Do You Need A Financial Advisor? Here Are A Few Things To Consider to help you make a decision.
Understanding the Various Types of Financial Advisors
#1. Licensed financial planners
In order to construct long-term wealth management strategies for their clients, licensed financial planners consider every aspect of their financial lives, including insurance, taxes, retirement and investment goals, and more. They may work with particular kinds of clientele, such as professionals or business owners.
Psst! Signup for a MyPF membership and get connected to a licensed financial planner for professional help.
#2. Investment advisers
Market experts can help you establish an investing strategy based on your financial objectives. For their counsel on whether and when to trade particular securities, you pay them a fee. It’s important to note that the term “financial adviser” is intentionally written with an ”e” rather than an ”o” to distinguish precisely between legally authorised investment professionals.
#3. Stockbrokers
Bonds and stocks are purchased by stockbrokers on behalf of their clients. They can execute trades for both retail customers (individual investors) and institutional investors. They are typically connected to a brokerage firm.
#4. Robo advisors
Robo advisors are online investment management services that provide you with individualised recommendations for where and how much to invest using algorithms and information about your financial goals.
Numerous advisors employ a hybrid approach that mixes some one-on-one time with automated products.
Experts have claimed that robo advisors cannot take a personalised approach to risk management as a human would.
#5. Estate planners
It’s simple to put off making arrangements for your passing, yet doing so will prevent your loved ones from suffering. Financial experts can assist with organising your documents, such as a will or revocable living trust. A health care proxy and an executor are two examples of people who can make choices for you in the event that you are unable to.
Describe your financial planning needs. It’s okay if you require more than one type. Then, confirm that the financial experts you are considering have the expertise, training, and experience necessary to assist you.
How Much Can You Pay an Advisor?
Financial consultants used to collect fees based on a percentage of the assets they managed for you. Today’s advisers provide a wide range of pricing arrangements, making their services available to customers with different levels of financial resources.
On paper, commission-only consultants might appear to be completely free, but in reality, they may be paid a percentage of your investments or purchases. Most often, investment or insurance brokerages offer these “free” financial counsellors. Because they may only be bound to appropriateness criteria, these advisors could end up costing as much as or even more than you would pay for a comparable financial product recommended by a fiduciary financial advisor.
Financial advisors that are fee-only or fee-based can base their fees on the overall value of the assets you have entrusted to them (assets under management), or they can bill by the hour, by the plan, through a retainer agreement, or through a subscription model.
A Good Advisor Explains Clearly
You might not feel secure in the choices you make if your advisor’s explanations of what is happening in your portfolio are too complex. You should anticipate that your advisor will be able to clearly and easily communicate difficult material.
The majority of clients don’t want to read the fund’s annual reports or learn complex stock analysis techniques from their advisors, but the finest advisors explain things in terms that the customer can understand so that the client actually gains knowledge from the adviser. Although advisors cannot promise to outperform the markets, they can offer comprehensive advice to foster trust, comprehension, and loyalty.
The frequency of your communications with your advisor should be decided upon at the outset of your working relationship. There are numerous things to take into account: In order to get to know one another and build your financial strategy, how frequently should you meet in the first year?
How frequently should you meet after the first year? Should you hold a meeting in the office or over conference calls and screen sharing? You’ll receive investment performance reports, but how often and how? A trustworthy financial advisor will always make sure you are aware of when you should communicate again.
You might wish to meet more frequently if there are numerous events (retirement, business sale, or divorce). However, it can make sense to meet twice a year or once a year as a checkup if you don’t have any important events and feel comfortable talking via email or phone conversations with straightforward inquiries.
You can read more about the overall process you should go through in our article How To Craft Your Personal Financial Plan With Your Financial Advisor.
Conclusion
Finally, make sure to ask the major questions that revolve around your concerns, and make sure you understand the answers to these questions at your initial consultation with a financial advisor. What methods are used for financial planning? Are there competing interests in managing your money? How frequently can you meet with the advisor? Who are their typical types of clients? These are just some of the questions to consider.
The realm of finance is important and complex. It makes a lot of sense to seek help from third-party experts, but it’s also crucial that you commit to some due diligence before choosing the first financial advisor you come across.
Leave A Comment