Over the past few weeks I have seen a couple of financial plans produced by firms that have experience in providing advice on investing in residential property (i.e. not the traditional managed fund/shares type advisors).
Unfortunately, the quality of the advice was very poor and not worth the fees paid in my opinion. It upsets me to see people pay several thousands of dollars for financial advice and receive virtually nil value. Therefore, I wanted to write this blog to tell people what questions to ask before paying for any financial advice.
Before I get to the questions, there are usually two failings with poor quality financial advice:
Potential problem # 1: Limited in scope
In most situations, limited financial advice is risky. Advice can be limited to a specific asset class (e.g. only consider shares or property but not both) or be limited to a specific investment such as superannuation.
A useful analogy is going to the doctors but telling your GP that they can only examine the left side of your body. No doctor could ever be confident with their diagnosis as they wouldn’t know what they may have found if they could have examined your whole body. That’s why when it comes to quality financial advice, you really need to consider if limited advice will be worth paying for. Often, it is what you don’t know that can hurt you the most.
Potential problem # 2: Just a guise to sell you a product
Continuing with my medical analogy above, would you feel comfortable going to a doctor that could only prescribe one type of medication?
If a financial advisor can only recommend one type of investment (be it shares or property or something else), then there should be no surprises when they recommend that you should invest in that asset too. As Warren Buffett says, “you never ask your barber if you need a haircut”.
However, what if you have already decided to invest in a particular asset class? Even then I think it’s prudent to seek advice from a financial planner that can consider all types of investments. The reason being is that if you have missed something (i.e. if you were not aware of an issue that might compromise your investment success). Surely you would want to learn about it before jumping into an investment and costing yourself in lost time or money?
I am very careful to not let my clients self-diagnose. That is, a new clie
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