What we need from financial advisors?

Like any individual in any profession, every Financial Advisor will have different strengths and weaknesses. They each have different skillsets. None of them are perfect, and I include myself in that!

In this short piece, I will delve into the importance of what financial advisors can do with and for their clients, even though many clients receiving said advice might not immediately recognise what they are actually helping them do, achieve and avoid!

Key Points

• Avoiding fear-mongering
• Personalising the approach
• Keep investors on course, in ‘good’ and ‘bad’ times
• Taking time to provide the correct answer for you

Interestingly, some might perceive certain strengths a financial advisor has as weaknesses. However, many of these weaknesses are the not-so-obvious strengths that you will find in a really valuable advisor.

Being a financial advisor is more than just offering advice and technical expertise; it requires embodying the principles, values and strategies they advocate for their clients. It is not just about helping clients put in place the best possible financial plan for their future, it’s about living it.

A great advisor will also help keep their clients on the right path, helping them avoid overly emotional decisions, and other pitfalls that can derail their long-term plans, goals and hopes.

So, what do we need from Financial Advisors? Here’s my take on it..

1. Steering Clear of Fear-Mongering

In today’s fast-paced digital age, financial news outlets often sensationalize market fluctuations and economic uncertainties. We are all guilty of sometimes getting caught up in the wave of negative news, no matter how hard we try to avoid it affecting us emotionally.

It draws us in – we can’t help reading the article – and once it’s read, it can be difficult to completely block it out of our minds! It is all too easy to get picked up by the wave of negative media coverage in temporary declines.

A great financial advisor will spot when clients are starting to get swept away, and help them get back on the right course. The Financial Advisor themselves will lead by example, refraining from fear-mongering and focusing on providing objective insights and guidance. 

By staying grounded and helping clients understand the long-term perspective, Financial Advisors can prevent knee-jerk reactions, impulsive decision-making driven by market hype, and ultimately to avoid potentially catastrophic loss. 

Practicing what they preach in this regard means maintaining a calm and rational approach to investment and financial planning, irrespective of short-term market volatility.

If your advisor uses negative market movements or high volatility to encourage you into a ‘super new fund’, run a country-mile, dear reader.

2. Continually Assess and Adjust Portfolios??

Directly related to that, is another excellent strength that some might see as a weakness in a Financial Advisor. And that is one who encourages clients not to continually assess and adjust your portfolio. It is easy to constantly look at and worry about our portfolios, especially when markets are highly volatile.

It is easy to think that making regular adjustments will somehow help us beat times of downturn or avoid temporary loss. But if you have a smart long-term plan in place, you should feel confident that your investments will grow as planned over the duration that you need them to.

Financial markets are dynamic and subject to constant change. To effectively guide you, Financial Advisors must continually encourage you to look to the future, to your own life decisions, and of course, on the expected outcomes in the long term. These are based on objective study of 100+ years of market data.

A great financial advisor will help guide you away from this emotionally stressful behaviour. Demonstrating this proactive approach with clients helps you stay on course for your long-term financial goals. Ultimately, this skill, often perceived as a weakness, greatly increases the probability of you achieving them.

3. Cultivate a Personalised Approach – What We Need From Financial Advisors?

While financial advisors provide general guidance, it is crucial to recognize that each client’s situation is unique. It is called ‘Personal Finance’ for a reason! By practicing what they preach, Financial Advisors demonstrate the value of personalization and customization in Financial Planning. 

They should consider their own circumstances and goals, adapting strategies accordingly. This approach highlights the importance of understanding individual client needs, aspirations, and timelines and tailoring advice accordingly.

It fosters trust and confidence in the advisor’s ability to offer personalised solutions. One of the greatly underrated skills is empathy for other people – of putting yourself in their shoes, to help them to a greater level. It is something I constantly work on myself, by no means an expert, but working on it!

If we had more empathy, we’d have less of the terrible client outcomes that we have seen in recent times with regards poor investments. Empathy drives client-focused behaviours.

4. Foster a Long-Term Perspective

A financial advisor’s role extends far beyond short-term gains or losses. They should, as part of the client service foster a long-term perspective.

Advisors should prioritise building wealth steadily, focusing on goals such as retirement planning, non-financial goals, and legacy creation. 

This commitment to long-term objectives sets an example for clients, encouraging them to remain patient, disciplined, and focused on their own financial goals despite short-term market fluctuations.

5. Embrace Lifelong Learning

The financial landscape evolves continuously, and staying up-to-date with industry trends, regulations, and strategies is essential. This was never more evident as it was at the start of this year when PRSA regulations were overhauled! See Blog 215 Important Pension Changes in Ireland, and Chapter 24 Revenue Pensions Manual here.

A good advisor will commit to continually educating themselves and to professional development. They engage in continuous learning, attending conferences, seminars, and workshops, and staying informed about the latest research and best practices. 

This commitment to knowledge and expertise can instill confidence and trust with you as a client. If you know your advisor is working to stay at the top of their game, you can rest easy knowing that you will benefit over time.

6. Taking Time To Answer Questions

While a responsive financial advisor is what clients should expect and get, not having an immediate answer is not necessarily a weakness, right!?

Often, a question is more complex than it first seems. Rarely is a decision totally isolated from impacting another aspect of one’s financial picture. This all requires thought and consideration.

Far too often do people make a decision on ‘Item A’, and only months or years later realise that it has sometimes negatively impacted ‘Item Z’. While we can’t foresee every ripple of a stone hitting the water, it is best that your advisor encourages you to take time to consider as many aspects as you can at that time.

Also, if it is a technical question, an advisor that admits they don’t immediately know the answer is far better than someone that always seems to have a positive instant answer for every single thing!

Waiting and ensuring you are provided with the correct and optimal option for you, shows that your advisor is working in your interests, particularly if the answer isn’t always what you hoped to hear!

Final Thoughts – What to expect from a good financial advisor?

Financial Advisors, I believe, play a critical role in helping individuals and families navigate the complexities of personal finance, and the decisions along the way. The decision to do something or to do nothing.

A great Financial Advisor will always think of you when providing guidance, and not about what is best for them. They will want to build a long-term relationship, and share in your happiness when you achieve your goals.

They will help you navigate the effects of fear-mongering, personalise your approach, have patience, humility, integrity, and possibly most importantly, a long-term perspective.

If you feel you are getting these things, I’m delighted for you.

If not, perhaps meet with some other firms to see if they may be in a position to help.

Paddy