LIKE a doctor-patient relationship, communication, competence, and trust are key pillars in a financial advisor-client relationship.
The financial advisor has a fiduciary relationship with the client. This describes a relationship where one person (the client) places confidence and trust in the financial advisor’s ability to provide expert advice in the best interest of the client. The relationship shouldn’t be a one-off transactional type, but an ongoing relationship that seeks to guide the client at every stage of the financial life cycle. It’s a relationship that should not end at retirement. Retirees need the council of financial advisors as retirement is not the end of the road or a dead end but a journey to be embraced and enjoyed. Saving and investing should continue during retirement; therefore, retirees should be guided on how to invest in a way that they don’t outlive their money.
Studies have shown that there are retirees who become wealthy during retirement. Wealth creation and generational wealth are important milestones that financial advisors and retirees should not overlook in the retirement planning process. I encourage seniors and retirees to share their experiences with the younger generation as it is more important to learn from the mistakes of those who made them so as not to repeat them, as well as learn how to respond to financial setbacks and failures. The value of time can’t be overemphasised. It’s an enduring asset that if used wisely can create financial freedom and wealth creation. I advise the younger generation to learn early and save and invest early. Time and compound interest are powerful tools in the field of investing.
Let’s look at a study on the role of financial advisors in retirement planning. In its “2023 Planning & Progress Study”, the US-based financial services company Northwestern Mutual reported that 66 per cent (two-thirds) of Americans say their financial plans need improving, and they also believe that a financial advisor can build their confidence; yet only 37 use the services of a financial advisor. We don’t have to look too far to see this scenario as in Jamaica the situation is not better. The report also pointed to 79 per cent of Generation Z (born 1997 -2012) and Millennials (born 1981-1996) share the view that their financial plans need improving and agree that having a financial advisor would be helpful. However, it’s only through taking action that individuals can effect change in their financial outcomes. But do you know how to choose a competent financial advisor?
I often say to clients that they need to understand how their investments work. Too often people focus on “purchasing” a product instead of finding the investment solution that is most suited to their financial goals. If you don’t understand what you are investing in, then your goal will be like a moving target. The advisor’s responsibility is to help the client make informed decisions. Companies like BPM Financial Limited put a premium on financial literacy because financial advisors should be keen listeners, and patient, with the ability to teach, and guide their clients in making the decisions that best meet their needs. Clients should feel empowered and confident about their investment decisions. It is important for the clients to own the decision. After all your future is in your hands.
The Northwestern Mutual report revealed that people who work with financial advisors not only have increased confidence but are better prepared to deal with “unplanned expenses”, meet retirement targets, and achieve long-term financial security. Interestingly, the report stated that financial advisors “are the most trusted source for financial advice”. Spouses and partners place second in line for financial advice, followed by family members and the business news. A remarkable finding from the report showed that the role of financial influencers and social media have the least influence on respondents. This seems to be quite an encouraging sign as it indicates that when it comes to financial planning, across all demography, the professional competence and expertise of financial advisors are in demand. A financial advisor is like a coach. One-on-one conversation and effective communication are essential in a financial advisor-client relationship.
According to the “2023 Planning & Progress Study”, older American citizens choose advisors based on professional expertise and their commitment to maintaining a long-term view on investment, while the younger generation prefers advisors who have shared values, who will keep them up-to-date, and who will also save them some precious time. Millennials and Generation Z prefer working with financial advisors who are up-to-date with new technology and are aligned demographically, eg age, gender, and race.
One thing is certain the role of financial advisors remains important in financial and retirement planning regardless of an individual’s age or gender. Regardless of the prevailing economic condition your financial advisor can be a financial lighthouse.
– Grace G McLean is financial advisor and retirement specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial, or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at email@example.com