12 Sep Talk Dirty To Me
What is your reaction when you hear the words financial broker? A lot of people immediately think – you’re going to try and sell me something. At some stage over the past 10 years brokers have been filed next to used car salesman. Lets look under the hood and to discuss how to avoid the pitfalls of choosing a “salesman” over a competent advisor.
Broker seems to carry a negative connotation. In the Celtic Tiger years many people threw money at pension schemes not understanding the underlying investment vehicle but simply to reduce their tax bill efficiently in good times. During the subsequent crash people scratched under the surface of these so-called great tax schemes to discover they had seemingly lost their preverbal shirts on the market.
Was this a broker problem, an investment problem or both? We need to look at two things: Investment Risk and Charges.
Investments differ in volatility. Meaning, something that is 80%+ in “equities” (stocks and shares) can move like a roller coast, while over the long term outperforming other asset types. GREAT. If you can stand the heat, and have 15+ years to retirement. Anyone who ignored the crash, leaving their investment where it was, likely came out this year up over 45%. Anyone who retired during the crash with a pension fund still in equities would have literally lost their shirt.
A good advisor will manage your investment so that you are not exposed to this volatility the closer you get to retirement. A competent advisor will also put you in a place that matches your risk profile, so you don’t have unnecessary heart palpitations.
There are always charges (fees) relating to your investment and pension accounts. Before the regulator stepped in a few years ago these charges could be outrageously high. Your broker should always explain the charges in plain English. You may pay a reasonable fee for their expertise, and this cost is recouped by the reduction in your tax bill, investment return, savings on your existing policies, or a combination of the three.
There are two types of charges, fee based or commission based. Which one you go with may depend on your preference, and the level of ongoing service you require.
Where does this leave you? If you feel that someone could pull the wool over your eyes quite easily do not be pushed to do business straight away. But please don’t be scared to explore what’s available. Take control of your financial objectives! Here are a few things to look out for in an advisor:
Do they have a Qualification or are they only “in process” of getting one? All Qualified Financial Advisors are listed on the Central Bank register.
Did they carry out a risk assessment BEFORE they provided investment advise?
Did they discuss your entire financial picture to ensure they advise in your best interest, in line with your objectives?
Go with your gut. If at the initial meeting you feel dirty after (in a bad way), or just feel uneasy, you are probably right. You should feel completely confident with your broker and trust them.
Many people are getting excellent service nowadays from their financial advisors. If you have a broker who is giving you good service don’t be afraid to recommend them or provide a testimonial!