Monday, 16 July 2007

Advice from trusted sources

Yesterday I wrote about an article on where my father-in-law get his advice from. So if the advice he gives is a bit suspect, who should you be getting your financial advice from. This may be quite a basic question to answer, but it is a critical question which has many different answers. The correct answer will be dependent on what you are looking for. I was thinking about this over the last few days.

The source of the advice can be divided in to several groups. I shall discuss advice from trusted sources. In the next two posts, I shall discuss advice from friends and random advice.

Trusted Sources

This group is qualified to provide you with financial advice. They are qualified in the sense that they have had recognised training. For the financial planners in Australia that are qualified, they are part of an association such as the Financial Planing Association of Australia. This is certainly true as well if you are seeking an accountant, ensure that the accountant is qualified in the area that you want advice in. I mean, it is not much good to go to an tax accountant if you want some advice on book keeping.

But how do you trust the financial planner or the accountant that you have just chosen. If you can get a recommendation from someone that you truly trust, that would be ideal . You could be introduced to them.

If you are not able to get a recommendation, you may have to get advice from a number of financial planners. By getting advice from a number of financial planners, you will be exposed to a number of options and strategies. If a number of these options and strategies are similar, then perhaps the advice is sound.

Some of the other signs to look for are:
  1. Ask for full disclosure - typically, the financial adviser will be recommending a financial product. Is he recommending this product because he is getting a commission from it? Full disclosure also includes how he is getting paid.
  2. Consistent advice - The advice that you receive should be consistent over a period of time. If it is inconsistent, it is a sign that adviser may not have clear understanding of your situation and what you are aiming for.
  3. Value for money - the fees that your adviser is charging you needs to be reasonable. What is reasonable? It really depends on your situation and how valuable the advise is. If the advice you receive can generate high level of wealth, the fees may be a lot higher.
  4. Availability - How available is your adviser to you questions? Depending upon your situation, you may want to obtain financial advice quickly. Maybe, you may only talk to your adviser during certain time of the year such as the end of the financial year, but make sure that he is available when you need him, maybe not immediate availability, but at least within a day or two.
The number 1 question that you have to ask yourself about any advice is "does this advice make sense for someone in my situation? If it doesn't, what do I need to know for it to make sense." This is something that your adviser could explain to you as well.

I shall be discussing advice that comes from friends and random advices in the next two articles.

Add some comments if you have other ways of finding trusted advice.

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