Financial planners are a great way to help you manage your money and plan for the future. But if you choose the wrong one, it can cause more problems than it solves. You can find a good financial planner in Sydney if you know what you’re looking for and how to find it. Here are some mistakes to avoid when hiring a financial planner:
Not Understanding the Difference Between the Fiduciary Standard and Suitability Standard
The fiduciary standard requires that your advisor places your interests first in all client interactions and decisions. The suitability standard allows advisors to recommend products or services as long as they are deemed suitable for the client, which means it’s suitable from a risk-reward perspective.
For example, a stock market investment might not be suitable for someone who is concerned about losing money because of their age or retirement goals. The suitability standard allows advisors to sell investments with lower fees if they’re deemed just as good as higher-fee ones with less risk involved—a decision that may be best suited if you want greater returns but feel uncomfortable taking on more risk than necessary.
Choosing an Advisor with the Wrong Specialty
When choosing a financial planner, it’s important to make sure that they have the appropriate specialty for your needs. For example, if you are trying to get out of debt and manage your cash flow, then an advisor who focuses on investment planning may not be the best choice for you.
On the other hand, if you’re already comfortable with investing and want someone who can help guide you in regard to retirement planning and estate planning, then an advisor who focuses on these areas might be better suited for your situation.
Picking an Advisor with an Incompatible Strategy
Another thing to keep in mind is to make sure that your adviser has a compatible strategy for your needs.
A common mistake that people make is hiring an advisor whose approach doesn’t mesh with their goals. This can be particularly dangerous and lead to disappointment down the road when you realise the financial plan isn’t realistic or flexible enough for you to achieve your goals.
Let’s say you’re planning on buying a house in five years and increasing your savings so that you’ll have enough money saved up for a down payment on the property (which would put you ahead of many young couples).
If your advisor suggests saving only 10% of each paycheck because he believes saving more than 15% will take away from other areas of life—such as fun—it may not be an effective strategy for reaching those savings goals in time.
Not Hiring a Vetted Advisor
As important as a financial plan is to your overall wealth, how you choose an advisor can be equally as critical. You want someone who is experienced and understands your unique situation. You don’t want just anyone giving advice on how to manage your money because what may be the best plan for one person isn’t going to work for another.
As you can see, there are many mistakes to avoid when hiring a financial planner. We hope this article has given you some insight into how to avoid these common pitfalls. Now that your mind is clear on what not to do, it’s time for us to move on to the next section of our article: how to choose the right advisor!