Getting good financial advice to build your savings, investments

It might seem that you would only need a financial adviser if you have lots of money. If you think about it, though, the people who need advice the most are probably the ones with little or no savings.

If you’re in your 20s or 30s and haven’t accumulated much savings, it’s a perfect time to talk with a financial adviser about how to build a big investment portfolio.

As the Financial Planning Association of Singapore (FPAS) explains it, these professionals will use a financial planning process to help you figure out how to meet your life goals.

A good financial adviser will gather the right information, ask about your objectives, look at your present financial situation, and help you come up with a strategy to meet your life goals.

While studies on the effectiveness of financial advisers here are limited, investment manager Fidelity found that industry studies in the United States estimate that professional financial advice can add between 1.5 per cent and 4 per cent portfolio returns annually over the long term.

Even if you have expertise in selecting investments, advisers can bring rigour and sophisticated tools to planning for goals ranging from travel to buying a flat to retirement. 

CHOOSING THE RIGHT ADVISER

Even though there are benefits, it’s critical to understand how financial advisers work so you can choose the right type.

Plenty of financial advisers, from insurance agents and bankers to investment professionals, will be glad to offer advice. However, some of them may not look at a wide enough range of options or products.

An adviser from an insurance company may only advise you on his firm’s products, for example, while a banker may only advise you on her bank’s products. Others, including many who offer advice for free, may push products that earn them a commission rather than putting your interests first.

As a result, Singaporeans are sceptical about financial adviser. The Monetary Authority of Singapore’s executive director Merlyn Ee noted that the findings from a recent survey by the CFA Institute, the global association of investment professionals, which showed that only 10 per cent of Singapore retail investors believe that their financial adviser consistently puts their interests first. This is far lower than the global average of 35 per cent.

To get good advice, then, you’ll need to find an independent adviser who acts in your best interest.

While that may well mean paying a fee directly, it can be worth it if it puts you on track for a better future. And you’ll avoid the hidden fees from someone who pushes products to earn a commission.

KNOW WHAT YOU WANT

The first step in finding a good financial adviser is figuring out what you want. Some financial advisers focus on specific areas such as retirement planning or wealth accumulation, so identify your goals.

Next, you can identify potential advisers by asking family, friends or colleagues for recommendations.

Alternatively, FPAS has an online tool that helps identify independent financial advisers.

DBS Bank has set up Nav Hub as a non-sales financial consultancy centre where you may discuss your plans. Firms such as iFast include independent financial advisers in their lists, though you will need to screen them carefully since the list may be subjective. Or you may do online searches to find financial advisers as well.

NARROWING YOUR CHOICES

The next step is to interview potential advisers. You can start by looking at the advisers’ Facebook pages or websites to find out whether they have the experience and style you want. Experts suggest meeting with several potential advisers and asking about half a dozen questions.

You should ask how they develop the financial plan, their experience and credentials, how they explain their recommendations, and how they are compensated.

You may also ask them to explain a financial concept such as choosing between growth and value stocks, to figure out whether you like their style.

The Gen Y Planning team in the US, which focuses on planning for millennials, suggests looking for an independent fee-only financial adviser who is close to your age, has a good personality fit, can work with your busy lifestyle, and takes a holistic view of you and your goals. 

Finally, you can select a financial adviser and meet with her or him to develop a financial plan.

Make sure that he or she understands your investment profile, develops a plan based on your profile, and suggests strategies or products that match your goals.

Know that you are not locked into one person forever, so you could switch if the fit isn’t right.

IMPROVE YOUR OWN KNOWLEDGE

To make the advice more useful, you may want to develop more financial knowledge yourself. Taking online courses such as Coursera’s Financial Planning for Young Adults or SkillsFuture’s Managing Your Personal Finances can be a start. Citigroup Foundation by Citbank and the Singapore Management University have a Citi-SMU Financial Literacy Programme for Young Adults.

Sites such as The New Savvy and Seedly offer financial planning tools, articles or videos. And libraries offer books as well as talks.

While it may be easy to go to a bank or insurance company to get financial advice, it’s essential to realise that the advice may not be independent and holistic. Spending a little money now for independent financial advice, even if you hardly have any savings at all, can bring bigger benefits than you might ever have expected.

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