4 Mistakes to Avoid While Finding a Financial Consultant
There are a lot of Financial consultants out there in the market. How do you choose who to trust?
Here are the 4 mistakes you should avoid while finding a financial consultant.
Mistake #1 – Finding a wrong consultant who is not licensed to promote your required financial products
There are various stages in life, i.e. starting out in new career, getting married, becoming parent, retirement, etc. Different life stages requiring different types of financial products. The followings show the 4 wealth pillars with its respective products:-
- Wealth protection: Insurance products
- Wealth preservation: Saving products
- Wealth creation: Investment products
- Wealth distribution: Will and trust products
Promoting different products requiring different license. In fact, many do not know this. For example, Bank Negara is issuing the licenses for consultant to promote insurance products while Security Commission takes charge on the consultants’ license to promote investment products. A consultant will require a separate license to carry out fee based financial consultancy service and hence most financial consultants do not charge fee because they are not allowed to do so.
If A is in his mid-age planning for his new-born kid, A shall not only engage insurance consultant for protection. A shall also look for financial consultant who has the investment products license and trust license to cater for the changed needs. What I normally see people doing is just to seek advice from financial consultant (who can only promote insurance products) on the changed needs. Easy to guess, at the end, the client will only have more insurance policies as the consultant is not licensed to promote other products which the client needs. Best to get a licensed financial consultant who can do financial planning, having license to do all the above wealth aspect to able to get the big picture of your finances. Ask what license the consultant has before engaging him / her!
Mistake #2 – Engaging consultant who is promoting products first without understanding your need
When you see consultants come to present about their financial products without doing an analysis of what you have already, chances are, they only want to sell you their products. They do not care what you need.
If you are looking for independent advice, look for one who charges fee rather than earning through product commissions. If one does not need to earn from selling products, he / she can give more independent advice. If the fee is a concern, look for consultants who can offer various financial products from different banks / institutions. The clients can benefit from wide range of products rather than just few products from selected banks or financial institutions.
Mistake #3 – Engaging consultant who promises you for certain investment return within a short period of time
There are financial consultants promising that fixed return for investment products. How can that be true? Think about it, nobody can control the market. How can he / she promise the absolute investment return when no one is able to predict the market movement. Be aware if the consultant promises fixed return within short period of time for certain investment products. If it is too good to be true, it probably is!
Mistake #4 – Engaging consultant who does not purchase his own promoted products
The requirement threshold to become a financial consultant is rather low. Hence, the market is flooded with many financial consultants who is hoping to earn their big commissions or incentive trip by selling products. They do not believe the products at all and hence do not buy themselves. How congruent is this consultant to sell a product if he does not even have one in place? Ask the consultant whether he has his insurances / investments / will & trust in place when they promote you one!
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