Finding the right Financial Planner can be a difficult task at the best of times, never mind when you add the complexities of international advice and the dangers faced by expats looking for help in the offshore world (where rules and regulations tend to be somewhat lax compared to the UK, thus impacting the general standard of advice offshore).
Before you commit to a Financial Planner, you want to make sure you are going to be working with someone who is the best fit for you and your situation – if you hire the correct Financial Planner, you’ll work with them for the rest of your life after all!
For expats, you also want to make sure you work with a reputable firm who operate to UK standards – these are still few and far between, but there are a small number of these firms active internationally now.
Start by asking yourself one key question, then check out these ten key questions you should ask a professional before hiring one.
If you follow the steps below, you’ll be in safe hands for years to come.
The Key Question – Firstly, do I even need professional advice?
Good advice will be cheaper in the long run – according to Vanguard, working with a good Financial Planner adds 3% of value per annum.
However, professional advice is not needed by everybody.
For lower-level investors, you probably don’t need professional advice. The birth of robo-advice in recent years has been a brilliant addition to the advice industry, making some progress in closing the advice gap.
If you find that you are starting to save a little – and the time is right to start investing – but you still only have smaller amount (say roughly <£100,000), then robo-advice could be a great option for you.
Your circumstances are not particularly complex, your net worth is not particularly high, and you’re not yet drawing much/any attention from tax authorities?
However, you don’t know where to begin, so you would appreciate a helping hand to get you started?
In this case, robo-advice can be a great option. Picture it like bowling with an entry level ball and the bumpers up – great for beginners who don’t quite need the full service yet.
Bespoke professional advice becomes more useful, and eventually a necessity, the more wealth you accumulate, the more complex your affairs become, the more impactful mistakes and opportunity cost become, and the more stressful and anxiety-inducing it becomes to manage your own finances.
You will benefit from professional advice if any one of the below applies to you:
- Time: you simply don’t have time to plan and manage your own finances – budgeting, saving, investing, rebalancing, asset structuring, tax planning, cash flow modelling, record keeping, etc.
- Knowledge: you don’t have the knowledge to manage your own finances – where do I hold my money safely, how do I invest it, what share classes or domicile of funds do I use, how does my pension work, what are the tax implications of my actions, and so on. Maybe you have a little bit of knowledge, but you don’t know what you don’t know. Professional advice removes this anxiety and ensures no mistakes are made.
- Inclination: you simply don’t have the inclination or the interest. Maybe you have a deep understanding of financial markets, you know all there is to know about tax and trusts, you know every international jurisdiction inside and out. Maybe you’re even a qualified Financial Planner yourself! But you simply do not have the interest in the subject matter to give up your time to manage things yourself, and you would much rather outsource this to a professional so that you can spend your time on other things, the things in life you enjoy.
Our clients are usually missing all the above, but all our clients are missing at least one. If you fit this description, professional advice is for you.
So you think that you would benefit from taking professional financial advice – but what next?
Imagine if your doctor only ever recommended treatment using a pharmaceutical company that pays him a great deal of money for such recommendations.
Not the best, or the most appropriate treatment for you, but the one that pays him.
Sounds absurd, right?
But this is precisely the situation international investors face when trying to choose a financial advisor.
Better yet, imagine if your doctor had been a real estate agent last year, and the letters after their name were made up… we’ve seen it happen!
Hiring a Financial Planner is a very personal thing – your Financial Planner will be managing your life savings, guiding you through huge life events, and helping you to make good decisions with money.
They will have a profound impact on both your life and the lives of your loved ones. And, eventually, they’ll probably know more about you than your closest friends.
Therefore, hiring the right one is a big decision, and one you want to get right.
So, what questions do you need to ask to ensure you do?
1) Are you fully independent?
Like your doctor, your Financial Planner should be completely impartial and should only be working for you and your best interests.
It’s important that they are completely independent, can recommend anything in the market, and have no formal ties to any specific product providers or investments.
Nor should they have, or offer, their own products.
Think of your Financial Planner as a consultant – their service is the knowledge they have and the advice they provide.
If you think this advice will be clouded because it’s in their interests to recommend certain products – or their own products – then this is an instant red flag.
Their role is to be as knowledgeable as possible, know the market inside and out, and help you to navigate it – you are paying them to make sure you make the best decisions, not just good or ok decisions. And certainly not bad decisions.
2) How do you get paid/how does the firm generate revenue?
This can be a great question to help confirm the independence of the firm.
A truly independent Financial Planning firm will only generate revenue through client fees – thus, their only loyalty is to their clients.
Happy and prospering clients result in a strong business, and upset or struggling clients have the opposite effect.
For reference, there are typically only two types of fees Financial Planning firms will charge:
- Initial Advice Fee/Implementation Fee – this covers all the work involved with set-up and bringing onboard a new client. This will be a one-off fee at the beginning of the relationship, never incurred again. To help you benchmark, this can be anywhere from 0.5% to 3%, depending on the sums involved, complexity of your circumstances, and the amount of work involved.
- Ongoing Advice Fee – once you are a client of the firm, this covers all advice moving forwards. You should be able to cancel this at any time (with no penalties or financial impact of any kind) if you no longer see the value in the advice or the relationship. 1% p/a is a good benchmark here.
Outside of these two types of fees, truly independent firms should not generate revenue from any other sources.
Some common examples would be:
- Commission for recommending certain products (this creates an obvious conflict of interests and has been illegal in the UK for a decade).
- Products, investment platforms, or banks that pay the Financial Planning firm a “sweetener” for using them.
- Specific investments that pay a hidden fee to them.
Therefore, your interests are completely aligned – so you know that your Financial Planner is genuinely sitting on the same side of the table as you, looking out for you, and helping you to make optimal decisions.
3) Where is my money held? How do I see it and track it?
Remember, your Financial Planner is providing a professional service – advice.
They are helping you to make your own decisions, and ensuring your decisions are informed ones.
Thus, they should never actually handle, hold, or take possession of your money – this is another massive red flag.
Custody of your money should always be with an independent third party, such as a reputable bank or investment platform.
The account should be in your name and have no connection to your Financial Planning firm (other than the fact that they are giving you advice on it and recommending you use it).
The custody account where you hold your money should always sit independently to your Financial Planner – so if you ever do wish to stop working with your Financial Planner, you can cease that relationship without impacting your accounts/assets too.
Similarly, it’s your money and you should always have access to it. If you ever want to withdraw money or close your account, you should be able to do this at no penalty – exactly like withdrawing money from your current account or changing to a different bank.
This seems obvious, but you’d be surprised at some of the things we see in the international marketplace!
Finally, it’s 2023 – any option worth considering will have good technology in the background, so you will be given online access via a secure online portal. This will make sure you have total oversight of your money and your investments. Again, it’s your money, so you should be able to see where it is and how it’s doing whenever you like.
If any of this is missing – your Financial Planner doesn’t feel independent, is recommending their own product or feels a little too involved with the product, is handling your money directly, it’s unclear whether you can take back your money without penalty, or you’re not comfortable with the level of oversight you have over your own money – red flag.
4) What Qualifications Do You Hold?
Financial Planners or Financial Advisers must be qualified to level 4 (Diploma in Financial Advice) to practice in the UK.
Make sure the Financial Planner that’s going to be advising you meets this criteria.
The Gold Standard is then level 6, holding the status of either “Chartered Financial Planner” or “Certified Financial Planner”.
Anyone calling themselves a Financial Planner or Financial Adviser without proof of the minimum qualification standards should be avoided – no exceptions.
5) What Services Do You Offer?
It’s important to understand what services the Financial Planning firm offers before you decide to work with them.
Good Financial Planning firms will usually have a document that will outline this easily for you, such as a Client Service Proposition or Private Client Agreement – this will provide details about the company and the services they offer and will help you to understand whether they are the right fit for you.
The services offered by a Financial Advice firm can vary significantly – from simple services like setting up basic investments or life insurance, to full holistic financial planning, where the Financial Planner will consider all aspects to both your personal and financial life and recommend a plan to make sure you reach your financial objectives (this is also one of the key differences between a “Financial Adviser” and a “Financial Planner”).
It’s important for you to know what you want from the relationship, and you can make sure you choose the type of service that works best for you.
For some specialised areas (such as specific/niche tax advice), Financial Planners may not have the necessary qualifications to provide all the advice you need – if that’s the case, they will outsource this area or refer you to a specialist within their network, but this should be clear and transparent to you as the client.
6) How much does it cost/ are fees completely transparent?
The investing world can get murky, and it can be very difficult to determine the “all-in” costs of an investment portfolio.
However, a good Financial Planner will be able to shine a light on all of this and make it very clear for you.
Following on from point 2, their fee should be simple, clear, and transparent (e.g. 1%).
There will also be various fees and charges associated with the products and investments they recommend, so they will be able to outline this clearly for you so that you are aware of everything you will be charged – both seen and unseen.
Your total ongoing costs – including regulated advice (from a Financial Planner), the product holding your money (a pension wrapper, General Investment Account, a bank account, etc.) and the underlying investments (stocks/bonds/funds/ETFs, etc.) – should come to a maximum of c.2.5% (or well below 2% for the more cost conscious).
7) What does life look like as a client? How will the Client/Adviser relationship work?
It is very important to understand what the service will look like and how the relationship with your Financial Planner will work.
Will it be face to face, or will communication only occur over phone/video calls?
How often will you meet with your Financial Planner to review things?
Some people might only meet their Financial Planner once a year and then they’re good, while others enjoy more regular touch points.
What kind of support can you expect?
Will they be available for ad hoc questions or when you need something outside of scheduled touch points?
What are standard response times?
When will you receive valuations or reports?
It’s very important to establish how the Financial Planner will provide you with the service, and to make sure this aligns with what you’re looking for – you are paying for a service, so you should receive the service you’re comfortable with.
8) What is your investment philosophy?
Although investments aren’t the most important thing – and a holistic Financial Planner will help you focus on wider planning elements and keep you focussed on your Financial Plan and long-term objectives – there’s no denying that investments will always play an important role in the Financial Planning process.
Ask them to explain their investment process or their investment philosophy – this should be clear and detailed (so that you know there is a robust philosophy and clear strategy in place), but light on jargon (because they are professionals trying to help you understand, not unscrupulous salespeople trying to confuse you to make themselves sound more impressive).
Will investment changes be made only on your approval?
Or will they have discretion to make changes on your behalf?
If you have a strong preference for a particular philosophy or style of investing, ask the Financial Planner about it and see if it aligns with them and their firm.
For example, if you favour low-cost passive investments, ask whether they typically use these types of investments within client portfolios, or more actively managed funds?
Similarly, if you prefer to use actively managed funds and feel more comfortable knowing there’s a fund manager in the background with “their finger on the pulse” ask about this and how it aligns with the firm’s investment philosophy.
Top tier Financial Planning firms can typically accommodate different types of investors, but have an overarching and robust investment philosophy that will be consistent across styles to ensure good client outcomes even if the individual does prefer one style over another.
9) What does your typical client look like?
This can be useful to know, so that you can relate.
It’s always good to know that your Financial Planner is experienced and will know what to do when the time comes.
If you’re a business owner and you plan to sell the business in future, it’s reassuring to know that your Financial Planner has advised similar people through the same process many times before.
It will be a massive event for you, but something your Financial Planner has dealt with plenty of times before – just the person you want by your side to help navigate you through it.
If you’re a partner at a law firm, or an architect – it’s good to know that your Financial Planner is familiar with the typical career arcs and specific issues often faced by people in your shoes.
Similarly, it can be helpful to know that your Financial Planner is used to dealing with people around the same net worth as you – particularly for higher net worth clients who perhaps require more care when it comes to tax planning or estate planning.
In the international market, additional cross-border factors can often be relevant – such as retiring abroad or advising families which include a non-domiciled spouse (i.e. you or your partner is not British).
Whatever your specific circumstances, it creates additional peace of mind knowing your Financial Planner has seen it all before.
10) Personal Fit – can I see myself working with this Financial Planner/firm for the rest of my life?
Ultimately you want to make sure you feel safe and comfortable with the firm and the professional that you entrust your future with.
Did they seem attentive to you, listen to you, and genuinely try to understand you and your needs?
Will you feel comfortable being open and honest with them?
When life gets tough or throws you a curveball – are they the Financial Planner you want in the trenches with you? Are you confident they’ll still be in the trenches with you?
Life is not an audition; you only get the one go around.
Your financial future, and your ability to turn your dreams into goals, and your goals into reality, will be worked on side by side with your Financial Planner over the course of your lifetime.
You are effectively putting you and your family’s financial future in their hands – the right fit Financial Planner should understand that, appreciate that, and not take that for granted.
Serious money requires serious consideration, nor was your wealth built overnight. It deserves the appropriate stewardship.
Transitioning to a new adviser can also be disruptive to your financial plan, so you should feel confident that you can see a fruitful, trusting, long-lasting relationship with your Financial Planner – after all, the relationship will ideally be there for life.
Choosing a Financial Planner can be one of the most important decisions you make in your lifetime.
It can mean the difference between a worry-free financial future, and a very stressful one.
So when you are meeting with potential firms or Financial Planners, don’t be afraid to ask the difficult questions – it’s a great way to identify the bad ones and eliminate them quickly, while the good ones welcome all and any questions you ask.
As always, please do get in touch if you’d like to discuss anything in this article, or if you would like to discuss your own personal circumstances and future objectives with one of our Financial Planners.
Or perhaps you’d like to ask these 10 questions of us – I promise our Team are well prepared!
By Cornelius J. Lillis – CEO
Please keep in mind that, whilst we aim to update these articles periodically, the content could be subject to future rule changes. Always make sure to speak to a qualified professional to ensure you have the most up to date information and are taking regulated advice around your specific circumstances.