There’s nothing wrong with a financial advisor having a vested interest in your money. After all, you want them to make sure it works hard for you. But how do you know they really have your best interests at heart? Choosing a fee-only financial advisor option means there’s transparency from the start, with no hidden charges later down the line. It also means there is an open and honest relationship built from the very beginning. Max Keeling is the Head of Expat Advisory at Providend; he gives us the low-down on financial advisor fees, and tips to make sure you start off on the right foot.
Top tips from a financial advisor
Financial advisor fees can be a minefield. But by choosing a fee-only financial advisor, clients pay a fixed fee. Providend doesn’t accept fees or compensation from product providers at all. “With this model, there is no conflict of interest and our loyalty is to you,” explains Max.
For the best financial advice, finding the right financial advisor for you is an important first step. “We feel it’s impossible to predict what future market returns will be; and it’s therefore very difficult to know what wealth or investment advisor has the best investment portfolio. Therefore, focus on the areas you can control.”
#1 Keep investment costs low
“Ask for a full breakdown of fees, including from the advisor and fund managers and the platforms they use. There is decades of independent research that shows this can be a major indicator of future expected returns. Higher costs means the portfolio has to achieve higher returns to compensate; evidence shows that 80 percent of the time this doesn’t happen.”
#2 Ask for an overview of their investment approach
“Regardless of your investing knowledge, you should be able to understand what they do. Academics have shown that historically the most successful portfolios are globally diversified by investing in all countries, hold thousands of individual stocks versus hundreds, and don’t try to time the market by moving in and out. For us, it’s a red flag if you can’t understand their approach, and they don’t follow an evidence-based framework. We’ve all heard that past performance is not an indicator of future returns, but it doesn’t mean we can’t learn from a hundred years of data from around the world.”
#3 Rate the quality of their questions
“Is a potential financial advisor doing most of the talking and focusing on their products and portfolios? If so, it might indicate they are really an investment advisor and not a quality wealth planner..”
#4 Find an advisor with professional qualifications above basic level
“This can definitely be useful; in particular, look for Certified Financial Planners (CFP) where possible.”
Financial advisor fees laid bare
Cynics might assume that by choosing a fee-only structure, these fees could be inflated to make up for the lack of additional fees and commission later down the line. At Providend, a fixed fee is charged for initial planning, which can be flexed depending on the complexity of the client. For example, as Max points out, a single person in their thirties might have a simpler set up than a couple in their fifties with children. “We would assess the potential complexity on an initial call with someone, and agree the fee before commencing work.”
Building your investment relationship
So you’ve found your perfect financial advisor, and you’re ready to start building that relationship; but you’re wondering what to expect as you start your financial planning journey. Here’s the road map from Providend.
- “We are wealth planners first, investment advisors second. Our first focus is to help clients get clarity on what their life and financial goals might be, what lifestyle they have now and what lifestyle they could afford in the future.”
- “We do this by taking clients through a 6-to-8 week planning process before recommending suitable portfolios, platforms or products. For this planning process, we charge a fixed fee.”
- “If clients decide to engage us to implement the financial plan, we charge an annual fee as a percentage of assets invested through us. The focus is then to use best-in-class fund managers to implement academically proven, evidence-based portfolios. Because we don’t take commissions from fund managers or product providers, we can implement solutions at much lower costs. That saving goes directly to the client.”
- “In Asia, we see a lot of investment advisors but few real wealth advisory firms. Investment advisors will state they can add value by actively looking for investment opportunities and continually reposition your portfolio, and may charge higher fees for this service.”
- “Our value focus is to help clients achieve their financial goals by capturing market returns rather than trying to outperform them, and via an investment rollercoaster that is suitable for them. That might mean being in a lower return portfolio to provide piece of mind, rather than chasing maximum returns.”
Providend is Singapore’s first fee-only wealth advisory firm in Singapore. To speak to Max or one of his colleagues about financial planning and investment, call the Providend office, or go to the website for more information, including what you might need help with and useful publications available to help you define your needs.
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