What it means to seek and receive Advice

08/27/2018

Written by a professional woman in her late 40s and client since 2005

Having a financial adviser is like entering into a serious relationship.

If I just wanted advice on what stocks or funds to buy, I can do so online. I can also talk to bank reps eager to push their products. A financial adviser like Roy does more than sell you funds. He starts by having a holistic look at your life goals and plans. He takes time to understand you, your finances, your needs, your psychology, your family. How much you want to reveal is of course up to you, but I've found that the foundation of a good FA-client relationship is openness and trust.

Then he builds up a risk profile of you. That's important to figure out how much risk you can stomach. It isn't just about how much money you can afford to lose. It's about emotions - how much risk you can stomach before anxiety sets in.

Next he uses sophisticated tools I don't understand but which I am assured is based on empirical evidence, to build up an asset allocation strategy. Say you have $200K to invest. That amount will be used to invest in a few, say, a handful of funds.

Roy keeps track of the investment and reviews it regularly. He will track the performance of the portfolio and meet with you every few months to make tactical changes. Say Trump got elected and you get jittery and want out of the US funds. He will show you research on how the market is actually looking up despite the chaos around the election. And then you will both discuss whether it's good to pull out of the US funds, or stay fully, or maybe reduce your exposure for the time being.

Such reviews take place regularly, about once a quarter.

What I value most about Roy is his willingness to invest time to understand me as a client, and as a person. This is crucial to a successful financial advisory relationship, so he can understand my risk appetite, my blind spots, what makes me unduly confident or anxious about an investment, what is more likely to persuade me to save more each month, and coach me into making good financial decisions.

Roy excels as a sounding board. After a couple of years when I got more comfortable with him, I would ring him before making major financial decisions such as buying a property. He would talk me through my decision - once when he was on vacation in Phuket with his wife! And I would decide. I don't always agree with him. I may not do what he wants. But I always value his input.

We have a strong relationship - he makes his views known clearly, because he's the financial specialist. But I decide, because it's my money.

Some people baulk at having a financial adviser because of the fees you pay. I'm a believer that nothing is free. If you don't pay for financial advice, it's because the person selling you that financial product is getting a cut from the seller. Then you never know if the person is selling you something that makes sense for your needs or for his own commission.

I like Roy's fee-for-service model because it's clean and upfront, and there's no hidden agenda. You pay a wrap fee per year, of X per cent of your portfolio. Because his fee doesn't depend on the sales charges that most funds charge, he has every incentive to recommend you funds with very low sales charges.

In my job, I am quite decisive and clear-headed. When it came to financial management, I was very much a newbie and unsure in my 20s. Over the years, making investment mistakes on my own, and then reading up, talking to friends and with Roy, I've learnt some stuff about investment - not enough to go it alone, but enough to be decisive when guided by good advice.

It's very reassuring when Roy tells me I have enough for my future needs to step out of my current job into a lower-paying one if I wanted to.

I find it puzzling when successful professional women who function at a high-level at work, become the xiao nu ren (little woman) when it comes to their personal finances, handing over the reins completely to their husband or partner, believing that handling money is the man's domain. If the husband is disciplined and has the knowledge to invest wisely, well and good. But if he doesn't, it's a risky thing to do, to leave your financial future in the hands of an amateur. The couple should consider taking advice.

I sometimes try to tell my friends - it's your money, you earned it, you invest it. If you don't know how, do what you do in the workplace - source for and buy the service you need.