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Whether you are looking to save, invest, or grow your money, a financial advisor can help you achieve specific goals. Joe Dobbs reports.

Some young friends nipped over from Sheung Wan to visit my wife and I a few weekends ago, primarily to ask for a bit of financial advice. I’m a bond trader, not a financial advisor, but I was happy to share my two cents’ worth, particularly when I learnt that the lovebirds had just lost rather a large sum to some dodgy insurance scam.

I hear too many stories about young or simply gullible people, who are attempting to save for their future, making ill-informed choices, or quite simply getting conned. (Consider pyramid schemes, and the fraudsters who deal in them.) When it comes to making finance-related decisions, the most important thing to recognise, as I told my weekend visitors, is if something sounds too good to be true, it is. The second is just as straightforward – get yourself a trusted financial planner and don’t move without his say so.

Why you need a financial advisor

My young friends were rather taken aback when I advised them to employ a financial planner – more so when I advised them to pay him 1% of their annual assets. But to me this is absolutely essential. Whether you are just starting out, or well on the road to retirement, you need someone to watch over your finances for you. By having an independent financial planner on call, 12 months of the year, you get all the advice you could possibly need. What’s more, the cost involved is negligible since you are gaining expert advice that will help you pay off a mortgage, fund your children’s education and enjoy your retirement.

When choosing a financial planner, my first tip is that you avoid those who rely on commission for their income. Advisors who profit from enticing you towards particular products can’t help but be biased. Better pay someone an annual fee or, if your needs are really simple, a flat fee for a financial plan, topped up with a few hourly consultations over the year.

loma, or an advanced diploma in a relevant discipline such as finance, economics, accounting or financial planning. On top of this, he should ideally be a Certified Financial Planner, or CFP professional. As you can see on the Institute of Financial Planners of HK website: “CFP Certification is the world’s oldest and most recognised advanced certification for financial planners. It is the pinnacle of financial planning excellence and CFP professionals are required to meet stringent initial and on-going standards on competence, ethics and practice.”

To get the CFP credential, an advisor has gone through a two-year certification process, he is also committed to keeping up-to-date on the information you need through continuing education.

Note that advisors who rely financially on what they sell (insurance policies, securities or mutual funds) have professional relationships with the providers they work with. To avoid a conflict of interest, CFP professionals are bound by a strict code of professional conduct – they are ethically obliged to put your needs above their own. You are looking for a fiduciary – someone who has sworn to act in his client’s best interests at all times. A financial planner, who is not a fiduciary, is bound to sell you financial products that suit your needs but that’s it – they don’t have to be ideal or in your best interests.

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Questions to ask

In order to choose the right financial planner, the one who will best serve your needs, you have to be prepared to ask a lot of questions. As a starting point, ask friends and colleagues, who are of a similar age and earning capacity, for their recommendations. If you have children, ask other parents; if you are a recent graduate, talk to other graduates. Be wary of (run from) any financial planners who ‘cold call’ you – a successful advisor doesn’t have to hunt for clients.

While a friend’s recommendation is a good sign, rely on your own judgment. Be prepared to interview several advisors before you plump for one. Take your time, as you may like the first person you talk to but be totally blown away by the second or third. Approaches to finance vary widely, so explore the alternatives in order to find your perfect match.

In an initial meeting with an advisor, assess not only his qualifications but also his experience. Will you feel happiest being advised by someone newly graduated with high qualifications, or by someone older with fewer qualifications but more on-the-job experience? Some financial planners work with their clients directly, and others have a team of people working with them. Make sure that you meet (and warm to) the person who will actually be assisting you.

It’s important to assess whether an advisor typically deals with clients in a financial situation comparable to your own. Ask him about his other clients and request letters of recommendation. This way you can judge if he has the experience to deal with your issues and goals.

Discuss the advisor’s typical line of attack. Make sure his approach to investing isn’t too aggressive (or too cautious) for your needs. Importantly too, check that he is familiar with any financial products you currently own. Watch to see that he focuses on the services and strategies he can offer you, rather than the products he can sell you.

Once you have a couple of potential advisors shortlisted, run a background check on each of them. Have they ever been convicted or accused of a crime? Ask which organisations they are regulated by and contact them. (The CFP Board keeps records on the disciplinary history of its members). Ask too about the advisors’ qualifications and credentials and make sure their claims are true and current. You can find out through Google who administers the designation in question, then call the administrator for verification.

One final piece of advice. An advisor should fully understand your financial situation before suggesting ways that he can help you, or asking you how much money you have to invest. A good financial advisor will therefore ask you a great many questions when you first meet – about your health and your financial health (debt/ savings situation), and whether you have an existing will, insurance scheme and retirement plan. Be as open and honest with him, as you want him to be with you.

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