How to select a good financial planner

A financial planner is a professional helping you manage your finances. Financial planning covers various areas including investments, risk management, education funding, estate planning, and retirement planning.

What is the difference between a fee-based and commission-based advisor? How do you find a financial planner that best meets your needs?

1. By Referral

You could start by seeking recommendations from your friends, family, and colleagues.

Perhaps you already know someone who has worked well with a financial planner over many years. What does he/she like about his/her financial planner? What are the financial planner’s strengths and competencies?

2. Professional networks’ online databases

Visit the website of the Financial Planning Association of Malaysia (FPAM), Smart Finance, or contact us to get connected to a licensed financial planner.

You can also view the latest list of approved financial advisory firms at Bank Negara Malaysia (BNM) website.

8 things to look for in a financial planner
1. Qualifications and licenses

Your financial planner must have certification and be a member of the Financial Planning Association of Malaysia (FPAM) or the Malaysian Financial Planning Council (MFC).

Only someone licensed can be called a financial planner in Malaysia.

  • Do they possess a Capital Market Service Representative Licence issued by Securities Commission (SC) to deal in capital market activities including licensed financial planning?
  • Do they possess a Financial Adviser Representative (FAR) Licence issued by Bank Negara Malaysia (BNM)

Guide to key financial planning professional qualifications

  • Certified Financial Planner (CFP) CERT TM – issued by FPAM (typically takes one and a half to two years to complete).
  • Islamic Financial Planner (IFP) – issued by Islamic Banking and Finance Institute Malaysia and FPAM requiring 28 training days.
  • Registered Financial Planner (RFP): issued by MFC and requiring 42 lecture hours.

2. Experience in financial services

Your financial planner should have relevant experience of at least three years. Your advisor can better assist and guide you to achieve your financial goals with necessary and sufficient knowledge.

Concentrate your searches on financial planners focused on clients such as you. If you’re in your early thirties and still planning for your future, you don’t want a financial planner who’s focused on managing high net worth retirement strategies.

In addition, some financial planners may only work with customers having a specific range of net worth.

Engage a financial planner about ten years older to you, to narrow the generation gap.

3. Solutions and services offered, investment philosophy

The credentials, licenses and fields of expertise determine the financial planner’s services. Financial planners provide insurance, unit trusts, security products, and give investment advice with proper licenses from relevant bodies.

What is your financial planner’s investment philosophy? Aggressive? Overly cautious? Nevertheless, a capable financial planner should assist you to understand your investment philosophy and plan.

Your advisor should assist you to identify your main objectives and boundaries, and the best approach for you to succeed.

Is your financial planner putting his or her own money in the same solutions and services recommended to you?

4. Check for past disciplinary action or complaints

Watch out for any potential red flags.

You can find out if past customers have registered a grievance. The Securities Commission can also verify a financial planner’s credentials. Consider checking on criminal history.

Verify potential financial planners with FPAM and MFC. Is he or she really a financial planner or a commission-based agent?

Avoid an advisor who is a braggart or talks highly of skills in predicting market success. Stay clear of someone who acts like they’re doing you a favour by taking you on as you’re likely not going to be a priority.

5. Check whether works alone or with a team

Ask if the planner is working with other professionals such as para-planners, lawyers, or tax specialists, outside his own practice. If so, get a name list to check their background information.

If your financial planner does not have in-depth expertise in a particular niche area, does he or she have a team of other financial planners that can assist?

6. Ask about fees and charges applicable

  • Fee-based charges are fees for financial planning services. A financial planner would have a wide range of solutions and services with a responsibility of putting client’s needs first thus helping you select the best solutions.
  • Commission-based is when they get a commission based on the products or services you buy.

For better objectivity and transparency, select a financial planner who operates on a fee-basis. You may be charged an annually, hourly, by plan, by percentage of assets, or other clearly measurable basis.

7. Ask how often you will meet

At your fact-finding meeting, ask about the estimated number of meetings. What do the meetings entail and their objectives?

Financial planning covers a long-term horizon. You would expect the same long-term dedication from your advisor to give continuous service.

A financial plan is only the start of a long journey. Having a plan with no further discussion or implementation is of little use. To ensure your plan’s success, regular interaction between your financial planner and you is a must.

8. Get an advisor with fiduciary responsibility

A financial planner with fiduciary responsibility acts in the best interests of their clients (you!) above themselves.

A fiduciary financial planner has a legal and sworn responsibility to set aside all personal motivations and conflicts of interest in order to achieve the best results for your unique situation.

Financial planning professionals agree to comply with a strict professional conduct code and are ethically obliged to first provide financial planning advice to meet your requirements.

This article first appeared in https://mypf.my

MyPF is on a mission to help simplify and grow Malaysians’ personal finances through financial education.