In the previous post, I have mentioned that the Personal Money in June (Issue #118) has an article about how to become a good financial advisor and I wish to share it here. Recently, I am quite busy, so delay the sharing until now.
These are the five criteria to become a successful financial advisor:
1. Commit to lifelong learning
Financial planners need to be committed to continuous learning in a fast-changing business environment. Planners need to keep updated on the technical knowledge related to different aspects of financial planning, and then translate what you have learnt into practice. Only an educated financial planner can educate his client. After doing the research, he can then share it with their clients. A good financial planner will be able to help clients be discerning with the burgeoning choices of financial products in the market. Financial planners can stay competitive by staying relevant. Keep up to date with news and global events.
2. Define your service.
Planners need to understand what they are trying to accomplish from the financial planning practice. Thus, financial planners should decide whether they want to be generalists capable of providing a comprehensive financial planning plan or specialists who focus on one area of financial planning. Financial planners should avoid over-promising and under-delivering. Also, invest in supporting systems and tools, the planner needs a robust process to assess the risk the client is willing and able to take.
3. Be transparent.
It is critical for consumers to know what they are paying for and how they are paying for it. Be as transparent as possible when discussing compensation for the financial plan and/or advice. Financial planning is a process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve certain goals. To better educate his clients, it is advantageous for the planner to explain the entire financial-planning process. This helps them understand why they should pay you.
4. Build values and skills.
The skills required in establishing a relationship, identifying clients’ needs, presenting strategies and communicating them are necessary soft skills that a financial planner should have. To create trust, the financial planner has to have integrity and always out the clients’ interest first. To be respected, planners need to uphold the reputation of the profession at all times. To establish a good relationship with clients, update them frequently.
5. Aim to minimize diversions and errors.
Planners need to have a logical and defensible position for every assumption they take. Each assumption should be documented. Conduct “what-if” analyses and scenario testing to prepare for any eventuality. Planners should not paint a rosy picture by selecting a particular time frame. Instead, select different start and end points, and test them out. By preparing different scenarios, the planner will be able to demonstrate and clarify the trade-offs and propose options to close any gaps and create a buffer against unforeseen circumstances. Most importantly, it is to remind the clients that a financial plan is not static.
Even if you are not a financial advisor, you may look at your financial advisor/planner if he/she has the criteria above.
Enjoy your financial planning journey!
