aurora
Dr Keen Mhlanga
The truth is that no one knows what will happen next in investments markets. Some companies may still think an advisor’s role is to deliver market-beating returns year after year.
Generally, those are the same people who believe good advice equates to making accurate.
But in reality, the value a professional advisor brings is not dependent on the state of markets. Indeed, their value can be even more evident when volatility and emotions are running high.
The best of this role play multiple and nuanced roles with their clients, beginning with the needs, risk appetites, and circumstances of each company and irrespective of what is going on in the world.
The financial crisis is “example number one” of why individuals, investors or companies should not place “blind faith” in financial advisors.
Inadequate transparency, inadequate diversification and fear are all signs of an entity lacking a professional financial advice.
A financial advisor is a finance professional who provides consulting and advice about an individual’s or entity’s finance. Financial Advisors typically work for banks, investment firms or financial services, but they may also be self-employed.
Financial advisors can help individual and companies reach their financial goals sooner by providing their clients with strategies and ways to create more wealth, reduce costs, or eliminate debts.
Instead, the roles combine technical expertise with an understanding of how money issues intersect with the rest of people’s lives. Indeed there are several hats a financial advisor can wear to help clients.
A financial advisor is not just someone who helps with investments. Their job is to help you with every aspect of your financial life. In fact, you could work with a financial advisor without having them manage your portfolio or recommend any investment at all.
The financial advisor is also an educator. Part of the advisor’s task is to help you understand what is involved in meeting your future goals.
The education process may include detailed help with financial topics. At the beginning of your relationship, those topics may include budgeting and saving. As you advance in your knowledge, the advisor will assist you in understanding complex investments, and tax matters.
Step one in the financial advisory process is understanding your financial health. You cannot properly plan for the future without knowing where you stand today. Financial advisors provide clients with specialist advice on how to manage their money.
The role involves researching the marketplace and recommending the most appropriate products and services available, ensuring that clients are aware of products that best meet their needs, and then securing a sale.
Financial advisors may specialise in particular products, depending on their clients, such as selling employee pension schemes to companies or offering mortgage, pension or investment advice to private clients. Others are generalists, offering advice to clients in all of these areas, as well as saving plans and insurance.
They also help clients plan for their short-term and long-term financial goals including buying a home, paying for their children’s education, and retirement.
Financial advisors spend much of their time researching and analysing investment opportunities and meeting with clients and potential clients to go over investment strategies.
Their duties and responsibilities include market analysis, recruit and solicit clients, recommend strategies, execute strategies, monitor accounts, identify new opportunities, maintaining compliance with all rules and regulations, offering strategic advice on products and services such as investments, insurance coverage and debt management tools, securing stocks and bonds and establishing progressive savings accounts, performing market research to stay current with financial trends, preparing financial documents such as income projections and investment reports.
Financial advisors determine how their clients can meet lifelong financial goals through management of resources. They examine the financial history— past and current of their client’s assets and suggest exactly what steps the client needs to take in the future to meet their goals.
Although other financial advisor usually focus on one area of a client’s life, professional finance advisors will inevitably meet with their client’s other advisors-attorneys, accountants, trust officers, investment bankers in order to fully understand their client’s financial goals.
The last thing a financial advisor wants to do is to map out a plan that conflicts with investments that their clients has already made with their bankers. It is a research-heavy profession.
A financial advisor will conduct questionnaires and personal interviews to put together a client profile detailing financial objectives, current income, investments, risk tolerance, expenses, tax returns, insurance coverage, retirement programmes, real estate plans and other pertinent information to put together a plan that meets the client’s overall or specific financial agenda.
The plan itself is a set of recommendations and strategies for the client to use, or to ignore and the financial advisor will be ready to answer hard questions about the integrity of the plan they map out.
The financial advisor synthesises all of this initial information into a comprehensive financial plan that will serve as a roadmap for your financial future.
It begins with a summary of the key findings from your initial questionnaire and summarises your current financial situation, including net worth, assets, liabilities, and liquid or working capital. The financial plan also recaps the goals you and the advisor discussed.
A financial advisor can also help you put together an estate plan to make sure your assets are handled according to your wishes after you die.
And if you aren’t properly insured (or you are not sure what insurance you need), a financial advisor can help with that, too. The advisor will set up an asset allocation that fits both your risk tolerance and risk capacity.
The asset allocation is simply a rubric to determine what percentage of your total financial portfolio will be distributed across various asset classes.
Financial advisors are listeners. The emotions triggered by financial uncertainty are real which include inadequate transparency as well as fear. A good advisor will listen to clients’ fears, tease out the issues driving those feelings, and provide practical, long-term answers based on their knowledge regarding experience, expertise and researches.
This can also be achieved by teaching the client getting beyond the fear-and-flight phase. Often this is just a matter of teaching investors about risk and return, diversification, the role of asset allocation, and the virtue of discipline. Financial advisors are anxious to retain investors by quickly generating positive returns.
Financial advisor are in a role of coaching and being a guardian of an individual or entity. Even when the strategy is in place, doubts and fears inevitably arise. At this point, the advisor becomes a coach, reinforcing first principles and keeping the client on track.
Beyond these experiences is a long term role for the advisor as a kind of lighthouse keeper, scanning the horizon for issues that may affect the client and keeping them informed.
Individuals, investors or clients need advisors who can provide client-centred expertise in assessing the state of their finances and developing risk-aware strategies to help them meet their goals.
Keen Mhlanga is the founder and chairman of FinKing Financial Advisory. He can be contacted on [email protected]; +263719516766.
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