Most people who have had dealings with financial advisers
probably place them into different categories depending on
how they feel they have been treated. These can range anywhere
from rogue or ‘hit-and-run artist’ to confidant,
friend and financial saviour. The same adviser can be all
of these to different people! Advisers are certainly more
popular when clients’ investments are doing well.
But no doubt financial advisers, like other professionals
from lawyers to doctors, also categorise their clients and
prospective clients. Here are some examples, slightly exaggerated
perhaps and a little ‘tongue in cheek’.
The compulsive buyer
This person is easily attracted to any suggested product without
first thinking it through or looking at the big picture. The
result, unless guided by a professional adviser, could be
an unbalanced portfolio of investments, dominated perhaps
by products which are cleverly marketed.
The remorseful buyer
This is a person who rushes into buying a product only to
have second thoughts and regret it later. In most cases this
comes down to financial reality when the client realises that
he or she cannot really afford the long term commitment or
that there are more pressing needs that have to be met. If
the remorse sets in a few months after the start of say, a
long term savings or pension plan, it can prove very costly
since most or all of the initial contributions can be lost.
The adviser suffers too because his commissions will be ‘clawed
back’ by the product provider. Far better all round
if the client weighs up all the pros and cons before the event.
The ‘micro-analyst’’
This person is constantly scrutinising his or her investment
and demands explanations for the slightest anomaly. This person
often concentrates on minutiae whilst overlooking the big
picture. One who for example questions a five dollar discrepancy
in a valuation when a fund has gained thousands of dollars.
Time would be better spent taking profits and selecting a
new investment for the profits. Details are sometimes relevant
but it is important to identify and focus principally on the
main issues.
The secretive type
Usually these are visible only at the prospect stage as few
make it to become clients. Just as a doctor needs to know
a patient’s background and symptoms, a financial adviser
needs to know the full financial health and future needs of
a prospective client. Yet now and again, more often in Bali
than Jakarta, I will meet a prospect who wants financial advice
but will not give details of earnings or cash in the bank.
This makes it virtually impossible to give best advice. There
are various reasons why this happens. In many cases the adviser
has not been able to establish trust or convince the prospect
that the information will be treated in confidence. Some people
are secretive by nature. There can also be a more sinister
reason if money has been acquired dishonestly or in circumstances
the prospect would not wish to divulge. Such assets in any
event would not get past the strict anti-money laundering
rules the offshore financial industry has to abide by.
The ‘ostrich’
This is a person who hates to follow the progress of his or
her investment, always fearful of hearing bad news. This kind
of investor actually fares better than one who follows investments
too closely and frequently changes course according to which
way the wind is blowing, such as buying assets ranging from
equities to property when prices are high and panic-selling
when they fall. The ostrich can miss out however by not rebalancing
assets at the right time or by missing tactical opportunities.
The ‘self-appointed’ expert
This is a person who considers he or she has a much better
understanding of the financial world than the adviser, spending
hours studying the form of obscure funds the adviser could
not possibly have time to devote to. The adviser’s recommendations
are usually ignored and he ends up just being an order-taker.
This kind of ‘expert’ usually fares badly but
blames the adviser.
The ‘perfect client’
This is a person who takes his or her financial planning seriously
and is prepared to periodically devote an appropriate amount
of time to discuss strategies with the adviser. This person
will want to understand the nature of long term investing
and the correlation of various asset classes without getting
bogged down in detail. An analogy would be if a doctor prescribes
little red pills a good patient will not ask for a breakdown
of the chemical composition but will want to know why they
are being prescribed and what will be the likely outcome.
Of course all my own clients fall into the last category,
just as I am the perfect adviser. Or I would like to think
so. At least we have something to work towards!
Colin Bloodworth is a senior adviser with Financial Partners
International. The opinions expressed are his own. If you
have any questions relating to personal finance you may contact
him at 021 520 8099 or
colin.bloodworth@financial-partners.biz
