[TOP STORY] How we rate our financial advisors

SIMON BROWN: We’re going to be chatting with Gavin Lewin of the Rich Ideas Group. He put a tweet out probably two weeks ago or so, asking how we rate our financial advisors. I think the simple [answer] is that we’re going to say, well, how you rate your financial advisor is are they making me rich? That’s probably it.

Gavin, I appreciate the time. We’ve got you on the line. Your tweet around how to rate financial advisors – there are very important things like coffee and the quality of that, but truthfully there’s a whole bunch more and it’s not going to be just around return, is it?

GAVIN LEWIN: No, absolutely not, Simon. Yes, it is an early morning, so good to be here. No, it’s not about coffee. In fact it really depends on what your mandate was to the advisor. I often find that sometimes there’s a sort of expectation disconnect between what the advisor expects and what the client expects. But if your mandate to the advisor was, for example, just to fulfil on the product, then you would want to evaluate that advisor against the advisor’s experience with that product, and that product sector, whether or not that advisor is in fact qualified to provide advice within that product sector, then also the legislative requirements around the product and the impact of that product on things like tax, etc. That’s absolutely the basic.

SIMON BROWN: So it comes back to almost the previous conversation I was having, which is that the first conversation you would have with the financial advisor is hugely important in that it sets the tone for that relationship – what you are hoping to get as an outcome.

GAVIN LEWIN: Yes. Financial planning as a process is exactly that. It’s about planning, and if there’s a planning process it means that you are wanting to achieve a certain outcome. So, if your outcome is to create wealth, for example, that is the expected outcome. Then of course the financial advisor or planner will have to be able to deliver on that mandate.

If one looks at one of the studies, in fact a paper that was put out a few years ago, the Gaza Vanguard, they looked at various components with regard to how an advisor adds value. The components really centre around did the advisor add value with regard to portfolio value, with regard to financial value or, more importantly, I think anyway, the emotional value because financial planning is a holistic process. You cannot just look at our financial outcomes. There are so many aspects to it. So when you engage with your advisor, initially, those are the things that you need to be able to articulate and get agreement of.

SIMON BROWN: And that perhaps is almost the more important one and a large part of your job, which is that emotional part – sort of talking me down when I look at my portfolio and it’s looking terrible because the world markets are collapsing. I imagine you spend a lot of time saying to folks, hang on a second, remember your goals, remember your timeline. This sort of thing happens. You’re kind of almost a guidance counsellor.

GAVIN LEWIN: Oh, very much so. Yes, you’ve got to look at the behavioural coaching side of the business more than anything else because, as humans, we are sort of irrational and we make irrational decisions – and that’s where an advisor can add a lot of value in the sense that you can identify blind spots and you can calm the client down with regard to making rash decisions which could have a major effect down the line in terms of the outcome of that portfolio.

SIMON BROWN: That almost flips the question on the head. We are talking here about how to evaluate. It almost becomes more a case of how to choose that. It’s about finding that right advisor up front in the first place and having, I suppose recommendations, having conversations and finding that fit because, again, if this works well this is a multi-decade relationship.

GAVIN LEWIN: Ideally it should be. I always say financial planning and the outcome should be as boring as possible. So it’s a long-term commitment in terms of that relationship. So yes, you’ve got to find the right fit up front. But remember, I said it depends on what the outcome is and what the mandate is. If it is to create wealth over time, then you’ve got to put those agreements in place up front, and don’t be scared to evaluate more than one advisor. Do the interviews, get the recommendations, get the referrals and find the right fit. That’s so important.

SIMON BROWN: Yes, it is. It is going to be that right fit. That is I think really at the crux of it. Again, if you start well, you’re probably going to end well as well.

We’ll leave it there. Gavin Lewin of the Rich Ideas Group.

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