Picture two flyers that were dropped into your mailbox. One from a hospital promoting their comprehensive medical check-up package, assuring a complete head-to-toe screening for a near four-figure amount. The other, from your neighbourhood pharmacy offering free glucose, cholesterol and blood pressure tests. No guesses which location will garner the longer queue.
When it comes down to personal finance, would you be inclined to settle for FREE financial planning advice in Petaling Jaya without knowing whether or not it is truly the best you can get? Or would you be willing to pay a fee for financial advice that can make a real difference to your net worth? Even if you choose to go for the latter, the baffling myriad of titles out there such as “financial planners”, “financial consultants”, “financial advisors”, and “wealth planners” would still add to your confusion and complicate your decision making.
How would the average Malaysian know where to obtain the best advice – one which is comprehensive, customised and covers every single financial concern?
The answer is simple. You need to pay for it. Here’s why:
Commission-only Financial Advisor
The commission-only financial advisor does not charge fees for his advice but is instead compensated by means of commission from the product owner (e.g. the unit trust/insurance company) when you, the investor/consumer buys the financial product.
As far as advice is concerned, he tries to give you the best advice he can based on his experience, product knowledge and a guesstimate of your needs and wants. The reality is that he never really understands your needs thoroughly – your various financial goals, your cash-flow, your total assets, your liability exposure. This inability of the financial advisor to get a clear picture of his client’s overall financial standing is not surprising because many clients themselves are in the same dilemma.
Despite the best intentions of a commission-only financial advisor to be objective and professional, the level and depth of his advice is still limited, due to constraints that prevent him from delving thoroughly into the client’s financial background. Any solution that is prescribed without understanding a client’s financial standing can potentially be dangerous because what might work well for one client may not augur positively for another.
With such a limitation, it is almost impossible for commission-only financial advisors to perform in the capacity and true calling of a financial advisor, which is to give quality advice to enhance the financial well-being of the client.
Therefore, the standard of ‘free’ advice is very much questionable, and could even be detrimental to the client’s financial well-being,
So, what difference can a fee-for-service financial advisor make?
Fee-For-Service Financial Advisor
The fee-for-service financial advisor is a separate class of advisors who will study and analyse your financial information comprehensively to develop a customised and detailed holistic financial plan before dispensing advice. The plan will give the advisor a 360 degree understanding of your overall financial situation.
The production of a customised holistic financial plan will require a few meetings and tens of hours in front of a computer. (This is where a fee is required to compensate for the time and professional experience).
The holistic financial plan is the proverbial key to the kingdom for any fee-for-service financial advisor. It is an imperative diagnostic and prescriptive tool, essential in forming the basis for any client to make good financial and investment decisions.
By looking at the holistic financial plan, you will understand where you stand financially today, where you want to be in the future and how you are going to get there. Think Waze, taking you from your starting point to your intended destination using the most efficient route. By making the plan your financial roadmap, the advisor will be able to propose tailor-made advice and investment strategies, while adopting clear benchmarks on how to measure the progress over a course of time. This includes undergoing a systematic investment process comprising of cash flow management, asset allocation, best of breed investing and investment performance monitoring. You will not merely be told to invest, full-stop. You will know where to invest, how much to invest, and the expected rate of return required to grow your net worth.
By spending time to understand you quantitatively and qualitatively, your advisor will be able to identify the most suitable ways to make your money work for you.
Will you become richer overnight? Probably not. Financial plans take time to materialise. Any claims of such a feat would likely be misleading. But what you will benefit from are results derived from tailor-made strategies to grow your wealth in totality. As an added assurance, your fee-for-service financial advisor will be there every step of the way to help you chart your direction towards your financial goals.
Many clients are surprised when the financial plan among other things, unearths stumbling blocks created by themselves that hinder their financial goals. Examples of common mistakes include underestimating living expenses, over paying insurance premiums, losing money on risky investments and over- ambitious lifestyle upgrades such as buying a bigger house or car as income rises.
Once these mistakes has been identified, remedial actions can be taken to minimise the impact of the client’s past financial errors so that the figurative drain hole is plugged as quickly as possible.
As a result, the client is then able to utilise his funds more effectively with the guidance of the financial advisor. He is able to maximise his savings returns, reduce unnecessary and unproductive expenditure and choose the optimum investment vehicles that balance risk and return.
When money is optimised to the best of its potential, the corresponding results will follow suit; enabling one’s wealth to grow with certainty year after year.
As consumers, the distinct benefits and advantages of paying a fee to a financial advisor to draw up a holistic financial plan for you are in plain sight. Nevertheless, in your quest to get a holistic financial plan for yourself, you may find many financial advisors who claim to offer the service too.
To know for certain whether you are getting the real McCoy, apply this acid test:
If the answer to all 3 is in the affirmative, then congratulations. You are on the right path towards getting a REAL financial advisor to help achieve your financial goals.
Looking back now, if you were faced with the two options to assess your medical well-being, would you still choose the one that is free of charge but only covers the basics and may not identify hidden, underlying concerns? If anything, you would reflect and sleep on it because you know that although the free health check is well intended and useful in some way, it is unable to substitute a thorough examination due to its inherent limitations.
Ultimately the few thousand ringgit you pay for the right financial planning advice in Petaling Jaya may seem a pretty penny to cough up today but once your financial goals take off and your total wealth increases, it will be negligible.
Some of the best things in life may be free, but to truly grow your wealth it’s wise to pay a fee.Back To Article Page Get Started Today