Can you really trust a financial planner's advice?

If you have the slightest bit of curiosity, you might be asking: “Can you really trust a financial planner’s advice?”

As financial planners, of course, our answer is “Yes.”

But, as you might remember that Mandy Rice-Davies said during the Profumo Affair of the early ’60s: “He would say that, wouldn’t he.”

So here are some (hopefully useful) thoughts about financial planning and trust.

Trust is part of what makes relationships work. Financial planning is a relationship between us and our clients. Clients have to trust us enough to reveal their true financial status and goals, and then trust us to invest wisely on their behalf.

If there is no trust, people will never become clients. Even if they do, those clients are unlikely to take our advice, because they won’t trust it.

Trust is a journey. We don’t expect you to trust us when we’re strangers. So before we invest your hard-earned cash, we invest time to get to know each other. However long it takes.

Because we have to trust each other and get on with each other, we will usually meet in person, or on Zoom or Skype if travel restrictions apply. We’ll talk on the landline if you don’t have a webcam or smartphone. In fact, we’ll meet again every year for a review and plan for the years ahead, as we find this gives clients peace of mind.

To start building trust from scratch, we usually do a small bit of work for you at our own expense. This gives you a flavour of how we work.

At this stage, some clients are happy to trust us enough to invest a bit, but won’t always commit all their money with us because they haven’t yet seen the results.

Once clients have developed sufficient trust in us and are fully engaged, they often hand over all their money for us to invest and allow us to advise on all their financial affairs. They also recommend us to their family and friends and the process starts all over again.

Good questions to ask before you trust a financial planner’s advice

Q. Does the financial planner charge fees? Are the fees completely explicit upfront? Are they presented in a simple format? Or are they buried in reams of paperwork?

Q. Can the financial planner provide evidence of client satisfaction? Will they share feedback from other clients? Will they provide contact details (with permission) so you can talk to their other clients if you want?

Q. Does the financial planner appear on the FCA register? (This is an obvious question to ask.)

Q. What qualifications does the financial planner have? Note that this can be a guide to effectiveness, but doesn’t guarantee certainty.

Q. Does the financial planner put their own money in the same funds they are recommending to you? If not, you might want to understand why.

Q. What is the backdated history of the funds they are recommending? Although past performance is no guide to the future, the financial planner should be able to show you graphs demonstrating how the fund has performed until now.

Q. Do they provide a combination of evidence together with a consultation where they talk through the evidence to ensure you understand it?

Q. How big is the company? Some people feel there is more comfort in a big company, while others prefer the personal touch you get with a small organisation where you can always deal direct with the same financial planner.

For more information on any of this, please give us a call or send us a message here.

Name: Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100