Four Things to do Before you See a Financial Adviser

Good financial advisers are worth their weight in gold, which is about what they charge. Do these four things to make sure you get your money’s worth.

Ok Generation X, let’s get the bad news out of the way. Then I’ll shower you with all we’ve learned from fucking up this process twice before getting it right.

Here it comes:

Good financial advice is sell-the-kids expensive.

Expect to hand over your first-born child for a straight-forward financial plan. If you need a complex financial plan, expect to hand over the lot.

But wait, that’s not all you get. It’s also time consuming.

You’ll need to wade through your mortgage accounts and tax returns and household budget. You’ve got a budget, right? Just teasing, no-one actually has a budget.

You’ll also need to prepare yourself to be financially violated. Encounters with financial advisers are like being cross-examined and mugged at the same time. They want to know how much you earn, how much you spend, how much you owe and, importantly, what you want out of life.  

Do I Even Need a Financial Adviser?

Yes. As soon as you can. Time builds wealth. Acting early on shrewd financial advice is tonnes easier than financially scrambling later in life. Can’t afford an adviser? Sometimes governments provide free services. Otherwise, educate yourself – see the links below to get started.

Now, the good stuff: Get the most out of your financial adviser by doing these four things.

Thing One: Know What You Want?

One of the first things a financial adviser will ask is, “What do you want out of life?” Usually, people say something like, “Umm, well, we just want financial security and for our children to be happy… Oh, and we want a jet ski. Yes, and the new Toyota Fuck-You-Joneses 4WD with the snorkel thingy, a hot tub with disco lights, a 24-seat home entertainment theatre extension on the family McMansion…”

The list goes on until the eye-rolling financial adviser is able to break through your orgy of materialism with something like, “Sure. Perhaps you’ve thought about how much money you’ll need to meet your lifestyle goals?” To which people invariably answer, “As much as is humanly possible”. Expect more eye rolling at this point.

Your financial plan walking into the meeting?

What your financial adviser wants to know, is what you realistically want your life to look like. They want a target.

So, to avoid your financial adviser looking at you like you just dropped your pants, jumped on their mahogany desk and took a giant dump, have a think about what you want from life.

Life is about more than jet skis. Start with the 40,000ft view: what is important to you? Family, friends, growth, wisdom, creativity, challenge, humanity, community? In other words, what are your values?

Once you know your values, think about what your life would look like built on those values.

If your values are family, community and legacy, what’s with the jet ski? Who knows, perhaps your great grandfather invented the jet ski and your family bonds over jet skiing up and down the local river, running over swimming children. If so, your jet ski should be elevated to value status. If not, ditch it.

A values-based financial plan might instead call for things like growing savings so you can travel interstate or overseas more often to visit the grandkids when you retire. Or it might mean keeping the larger more expensive family home when you’re an empty-nesters so your family can visit you more often and stay longer.

It is difficult to predict what your life will look like in 10 or 20 or 30 years, but you’ll have a much better chance of getting it right if you know what’s really important to you.

Thing Two: Think About What Retirements Means to You

Your financial adviser will also need to know broadly what path your life will take. Are you taking the traditional three-stage-life approach: education, work and retirement? Or are you aiming for financial independence? Will you move between work and retirement throughout your life?

This helps to pin down the turning points in your life. A financial plan for a 40-year-old that will work until 60 then retire, is very different from a plan for a 40-year-old that wants to be semi-financially independent by 50 and not fully retiring until 70.

Your adviser can then determine the type and level of risk for your investments at each stage of your life. Generally, the more time you have, the higher the risk you can take.

Thing Three: Know your Financial Situation

Your adviser will want to know where you’re at financially. They will want to know your shitty spending habits, the credit card balances you’re hiding from your partner, the mortgage payments you’re short changing, those “sure thing” shares that tanked and still haven’t bounced back in the eight years since that dude at the bar recommended them… and so on.

This will help your adviser ground-truth your financial goals. Many a retirement dream has been dashed here.

The good news is that nothing focuses your mind better on retirement savings than the prospect of dying of old age in an office cubicle.

You’ll need to know your Big Four: earnings; expenses; assets; and liabilities. Good advisers will ask you for this information before you meet. They like to know exactly how far up Shit Creek their clients have got themselves.  

italian-landscape-mountains-nature.jpg
Here’s a sweet-ass landscape to take your mind off your shitty finances.

Thing Four: Find a Good Financial Adviser

If you’ve never sought financial advice before, make sure you start with a financial adviser, not a property or investment adviser.

Property and investment advisers make their coin by advising you how to invest your money. They assume you actually have money to invest and that investing is the right move for you.

Before you consider this type of advice, you need to first know what your financial plan involves. You may not even need to invest. Your plan might only require you to pay off your mortgage or pump savings into a retirement scheme.

Investment and property advisers will always say you need to invest – just as a car salesperson will always say you need a new car.

Finding a good financial adviser is tough. Comparison websites can help, but be wary of manipulation of the sites – look for high numbers of reviews. Word of mouth is a good way to get the inside word. Just be sure to assess the mouth as well as the word.

Maggie and I opted for a fee-for-service financial adviser. This means our adviser was only paid by us – he didn’t accept any incentives from banks or other financial entities.

You can check on the company’s statement of financial services to see if they’re working on a commission basis.

Our financial adviser said we didn’t need a formal financial plan, which can cost $2000-$4000 – much higher for complex plans. He instead gave us homework like closing down a non-performing investment fund and saving hard into our mortgage. The one-hour meeting cost $350. We got off lightly. We’ll check in again with our financial adviser in a couple years or if something major happens.     

By doing these four things before you meet your financial adviser, you’ll save time and potentially money. More importantly, you’ll get a better financial plan.

Financial advice – what to do next?

  • Do a bit of background research on how financial planning works in your country. Often governments will provide this advice, as it’s in their interests to educate people on how to make good financial decisions. In Australia, for example, the government provides the Money Smart service.  
  • To find a financial adviser, and help weed out the scammers, financial adviser associations often provide registers of professional advisers. Here’s one of the Australian associations
  • Commercial financial adviser review sites can help with getting customer feedback. We used this one, for instance.  (We don’t have any affiliation with this company, and we’re not recommending them over any other).  
  • Some governments hold financial adviser registers of their own, which can be used to double-check advisers still hold accreditation.
  • It’s also worth familiarising yourself with the varied and ingenious ways scammers are separating fools from their money. In Australia, we use this service.