Here Are the Top 3 Attributes of a Good Financial Adviser

Kyith Ng

The true value of a good financial adviser you can trust is not in the type of life insurance and investment products he sells to you.

It is much more than that.

If you wish to find yourself a good financial adviser, look for these three unique attributes:

  1. Knowledgeable
  2. Experienced
  3. “Good Bedside Manners”

Let me explain why. And then I will list out some attributes that you should eliminate.

It can be really tough to find a good financial adviser for your family.

And I hope this article will help you identify one.

1. Knowledgeable – The Ability to Explain Complex Things in a Simple Manner

As a fan of Japanese animation, one of the most interesting shows that I watched in recent times is Hataraku Saibou (Cells at Work).

The very cute platelet team that helps reconstruct your body

This show takes on a novel storytelling approach to explain what the trillions of cells in our body do. It explains from the perspective of a red blood cell doing the important job of transporting oxygen around the body, and the white blood cell protecting her.

Understanding anthropomorphized cells of a human body are not the most fun subject. Even more so for the young. And Cells at Work succeeds in making us understand the interrelationships and the functions of our body’s cells in a very entertaining way.

When I was watching the show, I can’t help to think how much effort has gone into making these tough and dry facts simple and relatable. It requires both subject matter experts and storytellers to come together.

Similarly, in financial planning, the situation is the same.

Many of our clients do not live in the financial world and things can get a little tricky when it comes to helping them understand intricate ideas and concepts like why we choose to use certain financial assets over others and what are the advantages of the funds we use over other traditional index funds.

It is not enough for an adviser to possess only deep financial knowledge and expertise. Most of the time, it is the ability to persuade, influence, explain, and sometimes even to inspire others to take action that creates real value.

A good financial adviser is a knowledgeable one and should be able to answer any questions you may have by simplifying complicated concepts so that you can understand and make better decisions based upon that understanding.

2. Experienced – You have seen Enough

I would like to think that it is important to have seen enough of the brighter and darker side of life in order to be a good financial adviser.

That is not to say that young advisers cannot be good advisers.  I would define it more as team experience. A young financial adviser can be the one who faces the client directly but when the client’s situation turns out to be more complex, it is always good to have more experienced team members who have handled similar situations before to provide valuable inputs and highlight certain considerations.

I used to think that the bulk of financial planning can be guided by hard numbers – the required rate of returns and investment time horizon can clearly determine what a family or individual’s financial decisions should be.

Albeit working out and understanding the numbers are very important, an experienced financial adviser would also inform their clients that in certain situations, it is important to look beyond the numbers.

One of the frequently asked question in my years being a financial blogger is whether one should pay off his/her mortgage versus taking the money to invest. There are some nuances to this question pertaining to financial planning.

Some may have interest rates obnoxious enough that it is only logical to pay the debt off. Otherwise, if the interest rate is lower than the returns from investments, the answer is usually quite straight forward: Invest! Don’t rush to pay off the loan.

A good financial adviser is able to look at the left side that is financial planning and the right side that is investment before making a judgement that overrides the math logic.

My friend, who is a financial adviser, was once presented with such a case. The husband was on the fence on whether they should deploy their excess savings to pay off the mortgage or to start investing. Having observed that the wife is exhibiting some uneasiness, the adviser probed further. The wife eventually shared how her dad got into trouble some years ago when he lost his job and have trouble servicing the mortgage.

The right thing to do in this instance may very well be to pay off the mortgage because the peace of mind for the wife has a much bigger payoff, not just for the wife but the husband as well: he does not need to put up with a very anxious wife.

Eliminating Dualistic Thinking

At Providend, one of the key values we provide for our clients is to re-program their dualistic thinking when it comes to life and wealth.

Dualistic thinking is when a person can only think of things in two states. For example, they think the decision is either to invest or not to invest. Or the decision to buy this endowment plan or not to buy this endowment plan.

Many of us are all brought up in a world that shaped us to be more dualistic in thinking. You either support this person or you do not support.

In wealth building, many of our clients are also conditioned to base their financial decisions not on the product’s alignment to their goals and life, but on the returns and whether the product gives enough guarantee.

Our job is to help these clients see that their decisions need not be dualistic.

Here are three examples:

1. Investing in an Aggressive portfolio versus a Conservative portfolio.

For some, we can recommend the clients to start their investing journey with a low-risk portfolio. Once they are more comfortable with, for example, the platform, how it works, the volatility of their portfolio, we would then slowly step up the equity allocation to a balanced portfolio.

A good financial adviser would coach you in terms of your understanding of risks, as well as what you are investing in. With that, your ability to take a risk also changes.

2. Whether they can retire at Age X or they cannot retire at Age X

Many of our clients were wondering if they would have the financial resources to retire at e.g. age 60 when they first approached us.

They are anxious to know whether they could or could not retire at this specific age. Instead of answering their questions directly, an experienced financial adviser would lead the clients to explore their goals, what are the life options available to them, and how they wish to live their life going forward.

The adviser can then work out how to re-allocate their clients’ wealth to best meet this set of life goals.

3. To leave a legacy versus not leave a legacy situation

We often encounter clients who came in explaining their dilemma as they were advised to purchase a product designed to leave a legacy to their children. Even though purchasing this policy was not something they have initially thought of.

Their thought process subtly led them to think that they only have two options: either leave a bequest to their next-generation or not to leave a bequest.

Specialised products such as universal life policies, when advised in an inappropriate manner, can lead you to that conclusion. A good financial adviser would be able to guide the clients to explore their philosophy for their next generation, the significance of an amount for them (called a bequest), together with the goals for themselves now.

The adviser would discuss with the client on what is most important to them, which usually is to be self-sufficient and not be a burden (at least financially) to their kids. This allows the clients to refocus on their future goals to ensure that they have the cash flow to take care of their own needs.

Once that is settled, the couple can then think about the amount of bequest to set aside. Money that is not put into specialized products is fungible. When their goals change, the adviser can also help the clients carve out a portion of the portfolio for the bequest, and not to be spent down for their retirement.

3. “Good Bedside Manners”

A physician’s bedside manner is most often referred to as the way a physician interacts and communicates with his patients. A doctor with good bedside manners can communicate well with his patients while one with bad bedside manners may offend or be overly abrupt with patients.

We find that this strongly applies in other professions as well, especially the financial advisory industry.

Good bedside manners in financial planning entail being a good financial coach to the clients. A good financial coach typically has a strong grasp of the following:

1. Asks the right questions

A knowledgeable and experienced adviser probes the clients and tries to uncover their money stories from the past. In many instances, it is due to their money experiences when they are younger. This would help the adviser detect if the client’s ability to take risk is actually lower than what is assessed via a risk questionnaire.

The adviser would also ask questions to guide the clients to answer their doubts on whether they should purchase a particular product they come across.

While some clients like to be in control, advisers should put themselves in the role of the financial facilitator, so that clients can come to the conclusion themselves.

2. Does not cookie-cutter your scenario but actually listens

You are likely to be looking for a financial adviser that you can trust.

And often, that only happens when the adviser is able to develop a deeper relationship with you.

One way to build a deeper relationship between two people is through active listening.

According to psychologist Carl Rogers, active or deep listening is at the heart of every healthy relationship. It’s also the most effective way to bring about growth and change.

From a personal experience, when our clients feel like they are heard, they tend to be more open, and are often less defensive.

A good financial adviser is also a good listener who refrains from making judgments and provide a safe environment and container for their clients. By refraining from selective listening, where they choose to listen only to what they want to listen, it would be easier to practice active, emphatic and contextual listening towards their clients.

An adviser who is good at listening would be able to pick up some ques of disagreements and agreements, without the other party saying out loud.

The adviser would be able to figure out what is high on the client’s priority list in life. He or she would also be able to detect a slight change in their client’s facial expression that they might be uncomfortable with the portfolio allocation.

But to many of us, listening is just… hearing.

Clients may often feel that the financial advisers they talked to are more interested in talking about themselves or about what they can offer to their clients. And less about what the clients actually want.

3. Acknowledging clients and challenge them to improve their financial behaviour

A good financial adviser also needs to acknowledge their clients’ current status, what they are doing and feeling at the moment.

Acknowledgement is recognizing clients for the way they are. Too often, as someone who is an authority in our field, advisers unconsciously fall into the hole of judging others (even though they often say they do not).

Therefore, it is not easy to recognize their clients. Advisers don’t see who their clients are currently but just wish to advance them to be someone whom they want them to be.

A good financial adviser would be able to acknowledge their clients and hence build a more intimate relationship.

An intimate relationship that is closer than a mere adviser-client relationship, would eventually lead to the adviser challenging the client.

While the adviser knows that their clients may react in a certain way, he/she can urge them to give it a try because, with the backing of sound data and experience, they can guide the clients to get to a better position financially.

Too often, advisers will take the middle ground of presenting the products, and then let the clients “decide on which to choose”.

At Providend, we believe that as financial advisers, we should challenge our clients to take action when it is really the right thing to do.

Here Is What We Intentionally Left Out:

1. Competency and Sophistication

The reason why I left out financial planning and investment competency or sophistication, is not because I think these are not important.

Being sophisticated in our field is very important.

Without competency, our clients will be in a worse off financial state than when they first started. Nothing would be fixed if the client is aiming to fix their current situation.

I left it out because financial advisers SHOULD be competent as a professional.

It is a given that advisers SHOULD be appropriately trained to advise clients.

Can you imagine going to your physician and wondering if he or she has the expertise to operate on you? It is simply unthinkable.

2. Trust and Integrity

Again, it is not that I think trust and integrity are not important.

Personally, I think it is. We at Providend think it is as well.

The issue is that it is hard to quantify trust and integrity.

Almost all the advisers that you meet will tell you that you can trust them, and they will act in your best interest. There is no conflict of interest.

I do think that the three important traits mentioned earlier will build trust and integrity eventually.

But I also think that the firm in which the financial adviser works can be structured in a certain way whereby clients can worry less about any conflict of interest.

Delivering both the numbers and the human side

I used to think that numbers could sell the virtue of why it is important to have an eye on your wealth.

Some of my friends clearly see a certain individual within our group that sorely needs some guidance there. And they do think that I am the best person to “challenge” him to improve his or her wealth situation.

My advice has often been met with inaction on his part, despite my best efforts. At times like this, it is often the situation of “the student is not ready for the teacher”. However, this cannot always be the case.

Providing financial advice is both an art as well as a science. Sometimes I feel the science part is much easier than the art as the former can be obtained through formal training.

However, the art part is what differentiates now.

If you are looking for a financial adviser to be your life long financial confidant, I hope this has been helpful.

If you have found one, and you feel strongly that we have missed out on something, do share your thoughts with me in the comment box below!

This is an original article written by Kyith Ng, Senior Solutions Specialist at Providend, Singapore’s Fee-only Wealth Advisory Firm.

For more related resources, check out:
1. Retirewell Part 8: Purpose-Driven Retirement Planning
2. Know What You Can Control As An Investor
3. Financial Planning Is Also About The Now

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text. captcha txt