What Does a Financial Advisor Do?
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What Does a Financial Advisor Do?
Paul Cooper talks about financial advisors and how they can help you manage your money.What exactly does a financial adviser do?
I suppose the clue is in the name, to an extent: we give financial advice. But we’ve all met people who give financial advice in pubs and while some of it’s very good, lots of it isn’t.
The whole basis of financial advice is for the advisor to work with clients to establish their full financial situation. We don’t just give ad hoc pieces of advice, but understand where they’re heading, how they’ve got where they are now and understanding how they’d like to get there.
It’s about bringing all the strands together and making sure that the advice is tailored to that client. When I say I’m a financial advisor, people often ask me what investments they should go for – well if I could tell everyone the best investment without going into anything I would be a multimillionaire. And I probably won’t want to tell you!
So it’s very personalised. It’s about understanding a client’s objectives, their situation, exploring what might change and then putting a realistic plan in place to get them to their objectives.
If we can’t get them there, we see what we can do to tweak things or find the best course of action to improve their financial situation.
What services does a financial advisor offer?
We tend to focus on life events. If you think about people’s financial wellbeing, generally we make financial decisions based on life events. A big thing is advising on mortgages and property purchases. It might be your first home, whether you’re moving or buying investment property.
Pensions are obviously another big one. People need to make sure that they have adequate retirement savings so we need to understand what’s happening there. There are also investments. Pensions generally are a type of investment, but some people have standalone investments that aren’t necessarily for retirement.
So we help with all manner of wealth management up to, dare I say it, the end of the line. We can look at what people’s situations might be for inheritance tax and make sure they can provide for their families now and when they die. We tend to look at things holistically.
Once we establish a relationship with a client we review it all. In terms of the main services we provide, it’s about generating income, either through investments or pensions for retirement, or looking at purchasing properties or other large assets such as businesses.
When should someone be talking to a financial advisor?
There are times when people really should engage with a financial advisor, such as life events, but actually most people would probably benefit from speaking to a financial advisor at any stage.
Most working people pay into a pension, so there is always a good reason to engage with a financial advisor to make sure that pension is going to deliver a good retirement.
Most people at some point want to buy a house or get a mortgage paid off. People will rush off to a financial advisor when they feel they’re in a position to purchase – but actually it’s worth engaging with us in advance of that.
We can look at what options are available. You’d be surprised – lots of people are in a much better financial position than they realise. They just have to do things in a different way. It might be the case that we have a very light touch relationship at that point. We give some basic information and then build on that at a later date. It establishes a relationship and trust and allows us to work towards a goal.
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What’s the process? If someone called you today for help with their pension, what happens next?
I would offer to go and see them if they’re fairly local to me. If that’s impractical, I can certainly do a Zoom or a Teams meeting. We’d meet and we would go through the hard facts: who they are, what they do and what they’re hoping to achieve.
Some people have a really clear idea of what they want to achieve, while others don’t. We would run through their current situation and what they anticipate their final situation to be.
Lots of people will come to me because they have multiple pensions and want to know if it’s best to combine them. Sometimes it is, sometimes it isn’t. We make sure that things are invested in the right place, so we would discuss at length what they’re hoping to achieve.
I wouldn’t be able to make a recommendation immediately. We would need to get information from their current pension providers and perform some analysis based on the discussion that we’ve had, and then make a recommendation.
If we are going to move pensions or investments to different managers, we would take care of the necessary paperwork. We would run things through clients a few times. We would stress test scenarios and make sure that the discussions we have had are sufficient.
Quite often when you meet someone for the first time, they might not have the best idea of where they want to get to. But once you’ve explored some ideas with them and they’ve slept on it, and discussed it with family and friends, they start to get a clearer picture.
Things can change, too. People will phone me and say that while they didn’t think something I suggested was right at the time, it has worked really well for their relative or friend.
So it’s not just meeting people and forming a recommendation and then waiting five years until the next life event comes up. It’s about forming a relationship, getting an understanding and proposing some ideas to the client. We make recommendations and test what people are comfortable with.
So it’s often about helping people through the decision?
Quite often, people have a change process. Very few people wake up one morning and decide to move house. They don’t instantly phone up the estate agent and accept the first house they’re offered without any consideration.
If I sit down with somebody for an hour and then say ‘right, this is the thing you need,’ that’s not very credible. That’s me trying to sell something that may or may not suit their needs and aspirations. It’s like me walking into Curry’s to buy a television and the salesman tries to get me to buy a dishwasher. I might not be comfortable with that, but after a bit of consideration I might decide it is the best thing to do.
We need to take people’s thoughts into consideration. There’s no point in rushing a client into making decisions. We want people to trust their financial advisor so that when things do crop up in the future, they are comfortable to call or email me for thoughts.
Does it cost for an initial conversation with you?
I drink black coffee and if I go to see a client, it’s nice if they offer me a cup. But that’s all it costs for that initial consultation. I don’t believe in charging people to see them.
I earn my money by giving people advice and building up a bank of clients. So why would I want to deter people from having an initial conversation with me? Ultimately that means sometimes I go to see a client and find that the situation they’re in at the moment already is the best course of action.
I could move their pension or sell them a new mortgage, but actually I can’t do better than what they already have. Obviously I make money from dealing with clients., but actually it’s by doing the right thing that people come back. I tend to get referrals and that’s a much nicer way to do business.
I don’t charge for an initial consultation or to do analysis for the majority of the work I do. There are a few very small scenarios where it actually costs us money to get specialists involved. If there’s something we need to charge for we would discuss that with a client long before we went ahead with anything.
I’ll go and see a client and have a chat face-to-face or electronically. I will only be charging if I go ahead and implement some advice. We always make sure due consideration is given to all the costs involved, beforehand. We factor in those costs to ensure that what we’re offering them leads to the best outcome.
What else do people need to know about financial advising?
There’s nothing specific to add. There’s an awful lot available online these days and lots of resources. One thing that the internet isn’t very good at doing is actually explaining things and making them personal.
You can go online and see lots of financial information – but I do really think the personal touch is important. I would encourage people to get in touch and have a conversation. Tell me what you’re looking to do. The worst that could happen is just that I can’t help you with what you need.
But in the majority of scenarios there is something we can probably help with. So get in touch with a financial advisor and discuss things. We’re all human and hopefully we can put a personal narrative around it all, rather than just gathering information up from the internet and not necessarily using it in the way it’s intended.
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