Have you ever considered hiring a professional to help you with your finances?
Maybe you’re not sure what to expect and secretly you’re worried you’ll get ripped off. The whole world of financial professionals seems complicated and a bit mysterious.
Well, I have a bit of a unique insight into the world of financial professionals.
A few years ago, I started a financial education platform. We’ve now helped hundreds of people take control of their finances.
Over the years, I’ve spent hundreds of hours interviewing, hiring, and working alongside financial professionals to pull together our flagship Mastering Money program.
I’ve learned a lot about the ‘behind-the-scenes’ of the financial industry, and what a financial professional can and can’t do for you.
Here are three things you need to know about financial professionals:
1. Financial professionals are there to do it for you, not to help you do it for yourself
“I walked out of the financial adviser’s office more confused than when I walked in.” I’ve heard so many people say this.
Many people think they’ll understand their finances better by seeing a financial professional but that’s not necessarily true.
Firstly, most financial advisers are great at doing their actual job. Their job is not to “teach” you. You’re hiring them to give you advice, not give you an education. It’s not the same thing.
Having interviewed many financial professionals for teaching roles, I was surprised at how hard it was to find good teachers.
Many of them had forgotten what it was like to be a beginner and didn’t realise ‘simple’ terms like “asset allocation” or “inflation” are brand new to many people.
Secondly, even those who want to help often just don’t have time. They will spend some time explaining their advice, but they can’t spend hours filling in all the foundational knowledge you may need. And then you’re just left with advice you don’t really understand.
For example, to understand why they advised a higher-risk-investment asset allocation, you may have questions like:
What is asset allocation?
How is it determined?
What aspects of your risk profile make you a good fit for a higher-risk allocation?
What are the pros and cons of higher vs lower-risk asset allocation?
Isn’t risk a bad thing? Why would you want higher risk?
They just don’t have time. It’s not because they’re mean or don’t care (in fact, many of them care deeply) but it’s not their job to teach and they don’t have the time to teach.
2. If the financial professional is calling all the shots, you’re doing it wrong
Most people go to a financial professional thinking: “I have no idea what I’m doing. Just tell me what to do.” This is dangerous because it puts all the power in the professional’s court.
The obvious downside is that it makes you vulnerable to being taken advantage of, but even with a trustworthy and reliable financial professional, this is not ideal.
If you were going on a holiday, would you ask the pilot to just take you anywhere? Probably not. It’s your holiday, so you probably want a say in where you’re going.
Financial professionals can help you get to where you want to go, but you have to decide where you're going and you are the one who has to live with whatever destination you end up at.
So, ideally, you actually want to have a collaborative relationship with financial professionals. That means you ask good questions and actively participate in decision making.
Instead of a “just tell me what to do” attitude, it’s more of: “I was thinking of doing X, what are the implications of that?” or “Can you tell me the pros and cons of doing Y?”
The more you can drive the relationship, the more you will get out of it. Yes, this means that the better your understanding of finance, the more you can get out of working with a professional.
Many of our students are more confident working with a professional after getting financially educated because they know what questions to ask and can understand the advice being given.
If you don’t know anything about finance, how do you tell if the advice you’re being given is any good or not? How do you know what questions to ask? You don’t.
3. Don’t expect financial professionals to make you rich
We have some weird expectations of professionals in society.
For example, a doctor can’t make you healthy. Doctors can definitely help you deal with an illness, they can help you ‘correct’ health mishaps and put you back on the road to recovery.
However, being truly healthy? No doctor is going to come to your home and spoon-feed you healthy food, or make you sleep and exercise.
Similarly, financial professionals can’t make you rich. They can help you streamline, organise, manage your finances to a degree, and recommend some suitable financial products.
However, financial professionals can’t force you to change your spending habits, they can’t force you to be more open to taking risks to increase your wealth, and they can’t manage your emotions so you don’t panic and sell all your investments when the market dips.
For many financial professionals, managing money is the easy part. It’s managing their clients that is challenging. There is only so much a financial professional can do on your behalf.
If you really want to be financially successful, you have to take ownership of that goal.
When you do, you’ll find yourself being less dependent on financial professionals. You’ll also have more confidence in your own ability to achieve your goals, and, like many of our students, you may not even need a professional to achieve massive financial progress.
Paridhi Jain is the founder of SkilledSmart, an independent financial education platform helping adults learn to save and invest their money. For more money tips, you can get a free e-book on “5 Money Mistakes Costing You Thousands” via their website, and follow them on instagram.