A finance man for others

By: Efren Cruz November 01,2017 - 09:44 PM

Question: What are the qualities of a true financial adviser? – asked at “Ask a friend, ask Efren” free service available at www.personalfinance.ph and Facebook.

Answer: Of late, there has been a significant growth in the number of people giving personal financial advice from the very basic to the highly sophisticated. Here are some of the things you should look for in a true financial adviser.

Training – A financial adviser is one who has received sufficient training not only in the technical aspect for providing financial advice but also, and perhaps more importantly, in the behavioral side of it. People know the basics of saving, borrowing, insuring and investing. Yet people still omit what needs to be done and commit what should not be committed. A thorough understanding of behavioral economics is needed.

2. Experience – It is one thing to study personal finance and get all of the training certifications. But it is another to have actually practiced personal finance and provided advice to other people on the matter. A financial adviser who has counselled many also benefits from the experiences of others, which he can therefore share with his future clients.

3. Accountability – A financial adviser will not simply give a lecture. He will give advice that is borne out of a two-way relationship with his client. This type of relationship means that the financial adviser will need to study the economic situation of his client first, analyze it and then give his invaluable advice. Giving off-the-cuff recommendations will not cut it. In addition, the financial adviser must stand ready to back up his recommendations with monitoring or follow-up sessions to ensure that his client is achieving success. If not, the appropriate adjustments should be recommended. Thus, the activity of engaging a financial adviser goes way beyond just one meeting.

4. Responsibility – A person may have had success with managing his own money. But it is a totally different ball game if he has had experience and success in managing other people’s money where a fiduciary responsibility is created. A person managing his own money can do whatever with it because he answers only to himself. A person managing other people’s money will have to contend with his clients’ return objectives and risk preferences. There will be periodic meetings where he will need to defend his portfolio actions. The financial adviser must demonstrate that he applied both the science and art of fund management. Prudence is the top priority.

If I were to characterize a financial adviser in three words, it would be “man for others”. His overarching goal of helping others in their finances will compel him to be the best for his clients as well.

(Efren Ll. Cruz is a seasoned investment adviser and Registered Financial Planner of RFP® Philippines. He can be reached at (0917) 505-0709 and at [email protected] To know more about personal finance, please visit www.personalfinance.ph. To become a true financial planner, attend our three-day training in the Visayas and Mindanao. Details are available at www.personalfinance.ph/fptraining.html.)

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