9 QUESTIONS TO ASK YOUR FINANCIAL ADVISOR
I couldn’t believe what I was reading…
It was a text message from my old financial advisor (I don’t use them anymore and you’ll understand why shortly).
Here’s what it said:
Let me break this message down for you, including why it’s so appalling that someone with a license sent something like this.
Before we dive in, let me just say that I am in no way shape or form a Financial Professional -- so I’m going out on a limb here but this has to be said.
So let’s do this!
Firstly, financial advisors are licensed professionals who are supposed to know everything to do with investments and supporting you to build wealth.
The bee I have in my bonnet is that too many of us put our hard earned money with these advisors who, themselves, typically are not wealthy like we imagine them to be.
Back to the text message…
The first part:
“Can I tempt you”
If you’ve been in my world for more than a minute, you’ll know that I am SO BIG on the fact that emotions and money ARE NOT FRIENDS.
Same goes for business or investments, emotions should never ever ever come into it.
So when a financial advisor wanted to “tempt” me into an investment opportunity my hackles went up and oh my lordy lord, did I see RED!
If you were feeling down or vulnerable or like you could use a win and you received a text message like this, it could be extremely dangerous.
You see, advisors get a kick back from all the products they sell.
It’s a fact and most people aren’t even aware of it (even though they get you to sign a release form to say you knew…most of us just sign whatever they put in front of us).
That means, if a financial advisor wants to line their pockets by selling you a product they may or may not know is the right one for you…there’s nothing stopping them from doing that.
We tend to put anyone in a position of power - like a financial advisor - on a pedestal. And why wouldn’t we? They are sold as trusted advisors from our regulatory bodies.
But whilst they are perceived to have our best interest in theory, in practice, I don't believe this is what happens in the real world (and that affects you!).
The second part:
“Could potentially do well”
I mean…do I even have to say much on this?!
This is not okay in my opinion.
Enticing me to purchase something because of a ‘possibility’ it ‘might’ do well is absolutely outrageous.
How can I possibly make an informed decision with:
No back up research
No idea about my investment strategy (he could argue he did, but we haven’t had a review in about 5 years! That in itself is alarming!)
No exit plan for me to consider
So you can see why it is entirely unacceptable that this was sent to me.
But fortunately for me, I know this world inside and out. And I know this is not okay. I was not “enticed” or experienced FOMO with his “incredible, not to be missed offer.”
Lucky.
But what happens for those who don’t know anything about this world?
That’s why I had to share this with you, because I know this is happening everywhere and I am not okay with it.
And if you’re wondering, “But Coco…
…What should he have said?
…How should an advisor be talking to me about investment opportunities?
…How do I know if I’ve engaged the right financial advisor for me?
Before we get into that, let’s explore why you feel you even “need” one?
I’m totally onboard with outsourcing as much as you can, in life and in business, particularly things that aren’t in your zone of genius, are boring to you or you don’t fully understand…like dentistry.
But when it comes to your money…imo it’s an entirely different story.
As a society, we’ve been led to believe that we can just plonk our money somewhere, choose a set and forget strategy and bob’s your uncle - millions appear!
And while I’ll never argue the effects of compounding…
I WILL argue until my last dying breath that handing over our decision making ability to “someone who knows better”, because we have no clue is irresponsible.
But here’s why we do it:
✔️ We believe if we don’t come from money then we must know nothing.
✔️ We believe a “professional” will give us the magic pill that’ll answer all our prayers.
✔️ We believe if we don’t put a plan in place now, we’ll lose all the investment opportunities available to us
And most of us don’t make time to learn more about the different options available because “they know better”.
I’ve worked with countless clients, and heard just as many stories of advisors recommending plans and my client has assumed they are better off simply because they have “something in place”.
They pay thousands of dollars for the advisor to “look after” their money for them, yet when you ask very simple, basic and pointed questions; they have NO CLUE how to answer - it really makes my blood boil.
So I’m just going to say it
This industry preys on you not knowing.
They prey on your lack of understanding to make money from you because the system has labelled them as better than you.
They are not like a brain surgeon, or an astrophysicist or a dentist.
They are simply normal people like me and you who have taken an interest in the finance world and spent their time learning more about it.
And here’s a few more truth bombs:
Hiring a financial advisor will not help you understand your finances better
Hiring a financial advisor will not help you learn which asset classes are best for you
Hiring a financial advisor will not help you create your own plan
And it certainly won’t help you interpret the one that has been put together for you if you have no clue what you’re looking at.
#sorrynotsorry
Ok, rant over (for now) but before I move onto your questions, I want to say this…
Remember to explore why you feel you “need’ an advisor and what you believe they will do for you that you cannot do for yourself.
Here are some things to ask & look out for when considering using or interviewing an advisor.
I definitely encourage you to interview multiple advisors before you engage anyone to take on this critically important role for you, your family and your wealth building):
Is their total net worth more than your own? This may feel uncomfortable to ask but what’s more uncomfortable - losing everything you’ve worked so hard for or asking a question that makes you feel a little awks? I know which one I’d pick.
What strategies do they use to assess which asset classes are relevant to you?
How flexible is the plan they put in place?
How do they know the plan is right for you?
When they identify an opportunity, how do they determine the entry and exit of the investment?
What commissions do they make from the products they sell you?
How much do they have invested in the market themselves?
Do they personally enter the opportunities they recommend to you (do they have skin in the game, too)?
What is their track record? Not just over 5 years (if you take into account 2020 and half of 2021, most advisors thought they were the bees knees because everything rose, actually peaked! But that wasn’t their skill, the market in general did really well. And I guarantee, many didn’t have exit strategies for their clients who may have lost up to 20-30% of the value of their portfolios).
I’ll leave you with this thought…
Advisors put food on the table by selling you products. Do they really care about the results you get? I’m sure many would argue they do and I am not doubting anyone’s integrity but at the end of the day, it’s not their back pocket that’s taking the hit.
THIS is why I am so passionate about financial literacy, especially for women. I see it time and time again where someone will take it on face value, transfer money and then they are fucked.
I speak up to provide information and educate women in this area so they can spot a not so ethical financial advisor a mile away and avoid being preyed upon.
That’s why I write regularly on this topic and talk as often as I can on podcasts like this one and this one and it’s why I created the Female Financial Literacy Library.
Click here to get to get a taste of REAL financial literacy >>
EXPLORE DEEPER
READY TO GET ON TOP OF YOUR FINANCES?
But the ‘advice’ you’ve been finding online isn’t quite cutting it…
Maybe you have a little money in the bank and you want to learn how to manage it, grow it and invest it wisely for your future but you’re not sure of the best way to go about it.
Maybe you’re paying down a tax obligation, a big mortgage or compound interest on your credit cards and it feels like you’ll never be able to get ahead or truly be free from debt.
Maybe you want to set up a self managed super fund but you’re struggling to decipher the jargon, figure out the tax implications or find the right experts you can trust to guide you.
Maybe you have a small business or want to start one and you’d love some support and resources to help you set up solid foundations for sustainable success.
Regardless of where you’re at, you know you don’t want another over-complicated and time-consuming online program that gives you a mountain of unrelatable or irrelevant content that creates even more questions and offers no individualised support or attention.
This is exactly why I built the library.
Join a community of clued in women getting their financial literacy on lock……inside the Female Financial Literacy Library 👈
