The answer may not be that simple!
When most people get asked what they do for a living, the response typically doesn’t require a detailed explanation. We all understand what a police officer, firefighter, doctor, nurse, teacher, carpenter, plumber, electrician, etc. do.
However, despite being a financial advisor for close to thirty years now, I still have a difficult time explaining what I do in a single sentence.
The roles and responsibilities of a financial advisor or financial planner are quite vast, and not easy to sum up in a single statement. However, the value they deliver to their clients is far-reaching.
To start with, your advisor needs to ask questions to understand your needs and objectives. He or she may appear to be probing in areas you may be reluctant to discuss, however, please remember that the the deeper the understanding you provide your advisor, the more equipped they are to recommend the most effective solutions.
Through this “discovery” process, your advisor will be able to gain a good understanding of your priorities and goals and determine your current financial status. Furthermore, he or she should be able to guide you to think about areas of your financial life you may not have considered. He or she should also help you prioritize your financial goals and opportunities and determine which objectives are realistic. In conjunction with a written financial plan and/or investment policy statement, your advisor can make specific recommendations to help you meet your goals and implement the most appropriate strategies. He or she should also be able to suggest creative alternatives you may not have considered.
Your financial advisor should take a holistic approach to your financial planning, meaning he or she will look at your family’s financial security needs, review your life insurance and ensure you are properly insured. Your advisor should also analyse your income security needs to ensure you have the right insurance to preserve your financial future and assets should you become disabled or suffer a serious illness. This may also mean persuading you to do things you should do, even if you would prefer not to. No one enjoys paying for insurance but most recognize how critical the right insurance is to their family’s financial security.
Retirement planning and estate planning will also be important considerations and your advisor should be able to assist you in drafting a plan that will enable you to retire when you want with the income needed to support your lifestyle. He or she should also be able to help you plan for the most effective way to distribute your estate by minimizing the impact of income tax and the estate administration tax on your assets.
Your advisor can also prepare an investment portfolio for you with the right asset allocation for your overall objectives, timelines, preferences and tolerance for risk. He or she also completes his or her own due diligence on money managers in order to make the most appropriate recommendations. Ongoing management and monitoring is also important as is keeping up-to-date with changes in the investment world.
A financial advisor can review your existing portfolio to ensure it is arranged to your advantage and the risk measurements of the portfolio aligns with your own tolerances. Ongoing review and revision of portfolios may be necessary as conditions change. Guiding you through difficult times in the stock market is also an invaluable service provided by a financial advisor.
It is also important that your advisor monitors changes in your life and family situation, proactively keeps in touch with you and is available by phone or email to answer financial questions as they arise. Effective advisors will suggest alternatives to increase your income during retirement and may also make suggestions that can help lower your income taxes. He or she should continually educate you to give you a better understanding of how your investments work and on methods to manage both retirement and estate planning issues.
Your financial advisor is someone you can trust and can get advice from on all financial matters and he or she should be a good sounding board for ideas you may be considering.
The job of a financial advisor is broad, deep and complex.
You hire a doctor to look after your health, a dentist to maintain your teeth, a mechanic to look after your car and various other professionals to assist you with other parts of your life.
Hiring the right financial advisor can have a major bearing on your financial success in life, and can ensure you are financially prepared for both the hazards that can step in front of your financial goals, and also in the achievement of your most important objectives.
Shawn Pankow is a Certified Financial Planning Professional with Pankow Financial Solutions in Smiths Falls.