Ten questions to ask a financial planner – part two

Author: Jade Shelton
Published: 26th May 2021

If you’re looking for a financial planner to help advise on pensions, savings and retirement planning, it’s important to understand what they offer and how they work.

In this, our second blog on what to ask a financial planner before engaging their services, we look at five more questions to ask.

1. What is your investment philosophy?

There are many different approaches when it comes to investing. Many benefit the fund manager far more than the individual investor. It’s important to keep an eye on any fund manager charges, as many cannot deliver the returns that they claim.

Why this question is important?

Money is a bit like soap: the more people handling it, the smaller it gets.

Here are some of the main approaches you might come across:

Active management.
An active fund manager will make decisions about what to buy and when to buy it. Using a team of analysts to pore over public and private data, they try and predict the right time to buy and sell stocks. Their fees are higher and they do not typically outperform the market average. Active managers advertise their past performance figures when they are good. This has proved an effective strategy despite the risk warnings that past performance is no guide to future returns.

Index tracking.
Also known as passive investing, here the fund manager owns all the holdings of the index they are tracking. This means fees are much lower as the manager doesn’t need to work out what to buy and when to buy it. An additional advantage is that investors achieve the returns of the market average (i.e. index) minus fees.

Core and satellite.
Here there’s a mix of active and passive styles. Exposure to the market is captured using index tracking investments (core). Tactical investment plays are captured using specialist active funds (satellites).

Discretionary Fund Management (DFM).
Here there’s an extra layer of investment administration (and charges). The DFM decides what funds should be bought and sold. They can chop and change the portfolio without investor approval in order to try and add value on top of the market return. However, a falling tide lowers all boats and DFMs fail to insulate investors when the equity markets fall despite the extra fees.

Factor investing.
Financial science has identified many factors that can reliably explain variations in investment returns across markets, sectors and geographical regions. Tilts towards these factors can deliver additional returns when they are present. However, risk and return are related and the additional returns will come at a price – additional volatility.

It is important that you understand the investment philosophy of the firm or planner who is managing your assets. It needs to align to your values and support your view of where value is added in the investment landscape.

Our Answer:

Our investment solution is index tracking. We use low cost, globally diversified index tracking funds with tilts to the factors we believe will deliver additional returns over the long run. Our portfolios include a wide range of investments, catering for a broad spectrum of investment risks. We can also provide a portfolio based on environmental, social and governance funds (ESG).

2. Do you have a Statement of Professional Standing (SPS) for each adviser?

It is an FCA requirement that every adviser, authorised to provide financial advice on behalf of a firm, holds a valid SPS. It provides evidence that an adviser meets the relevant professional standards requirements. The SPS is issued by one of six accredited bodies:

CFA Society of the UK
• The Chartered Institute for Securities and Investment (CISI)
• The Chartered Banker Institute – formerly known as The Chartered Institute of Bankers in Scotland (CIOBS)
• The Chartered Insurance Institute (CII)
• The London Institute of Banking and Finance (LIBF) – formerly known as The Institute of Financial Services (IFS)

Why is this important?

The accredited bodies check all their advisers hold appropriate qualifications and set requirements for ongoing continual professional development (CPD). They carry out random 10% CPD sample checks and require advisers subscribe to their code of ethics.

You should request a copy of an adviser’s SPS.

Our answer

Huw jones holds a valid Statement of professional Standing issued by the Chartered Insurance Institute.

He is a member of both the Charted Insurances Institute (CII) and Chartered Institute of Securities and Investments (CISI) and subscribes to their code of ethics.

3. What experience and qualifications do you have?

Financial services is awash with an alphabet soup of qualifications and designations. There are different qualifications and awarding bodies for firms and individual advisers.

On the 1st January 2013 a new requirement for adviser qualifications came into force. All advisers were required to hold a level 4 qualification (or higher).

Why is this question important?

Qualifications for individuals can be confusing and difficult to understand without a background in financial services. Understanding what each of them means and why they are important is essential in choosing the planner who’s right for you. Here’s a summary the important ones:

This is the minimum required qualification to provide financial advice and is the equivalent to a first year honours degree. Qualifications at this diploma (QCA level 4) are usually designated by ‘Dip’ e.g. DipPFS or DipFA.

This is at an equivalent standard of a bachelor’s degree (QCA level six). It is issued by a professional body with a Royal Charter e.g. Chartered Insurance Institute (CII) or Chartered Institute of Securities and Investments (CISI).

Certified Financial Planning professional (CFP)
The CFP certification is a globally recognised qualification that is based on the application of financial planning principles (rather than exam/study based). It is assessed at QCA level 7 – equivalent of Master degree level – and is the gold standard for UK financial planners.

Registered Life Planner (Kinder Institute)
Life Planning is an in depth assessment of what’s truly important in life. It aims to connects the dots between the financial world and the ideal lifestyle. It’s tools and trainings make it possible for financial planners to cultivate a life plan designed to deliver the freedom to pursue one’s life passions.

Firms can also qualify for corporate accreditations:

Corporate Chartered Status
The Chartered Insurance Institute can award corporate Chartered title to firms meeting minimum standards around ethics, values and adviser qualifications. Look for the CII’s Chartered mark to identify firms which meet these standards.

CISI Accredited firms
Accredited Financial Planning FirmsTM deliver a comprehensive financial planning service to their clients. Their focus is helping their clients achieve their life goals rather than be financial product focussed.

Our Answer:

Founded in 1998, Proposito Financial Planning is a second generation family business. Huw Jones joined the firm in 1999 and his father retired at the end of 2015.

Huw now has over 20 years’ experience as a financial planner and during that time has acquired the following qualification and designations:

• DipPFS (CII)
• Chartered Financial Planner (CII)
• Certified Financial Planning ProfessionalTM (CISI)
• Chartered Wealth Manager (CISI)
• Fellow of Personal Finance Society
• Registered Life PlannerTM (Kinder Institute)
• Money Coach

Our Paraplanner Sarah Egan is a former financial planner who also has over 20 years’ experience. She is diploma qualified in financial planning (DipPFS) and is responsible for all things technical.

Jade Shelton started in financial services in 2013 and joined Proposito at the end of 2018. She is almost at the end of her Financial Planner apprenticeship which she will also achieve the level 4 DipPFS designation.

4. What services do you offer

A firm may have different levels of regulated financial advice depending on your exact requirements. In addition they may be able to offer additional services such as life planning, money coaching or tax advice.

Why this question is important:

It is important to know what services are available to you. Many firms offer additional services that you might not have thought of. With an understanding of the additional extras on offer you can make an informed decision about which firm (and their services) would add the most value and benefit you the most.

Money Coaching is starting to become more widely available and can help you to improve your knowledge, skills and money management. The additional accountability can have a significant impact on improving your financial skills so you can continue to improve your financial landscape.

Our Answer:

We offer a number of services and will recommend to you the one that we think you need. These include money coaching and financial life planning but our most popular service is financial planning. This is split into three distinct phases – Design, Align and Refine.

Design – will help you to identify what’s really important to you, create your vision and establish your goals. We’ll create a picture of your current reality and look at the options from where you are now to where you want to get to.

Align – will provide you with regulated analysis, recommendations and implementation of a strategy for your pensions and investments.

Refine – will benefit you by ensuring you avoid the mistakes that most people make on their own. On top of that, we’ll help you to stay accountable. You’ll take more action, make bigger changes and reach your goals sooner.

5. Who will manage my account

Some advisers operate as an independent entity within a firm. They select their own investment solutions and make their own recommendations. Other firms take a companywide view to investment solutions and products.

Why this question is important:

It’s important to understand that it is the firm that is responsible for the investment advice that its advisers give.

You should make sure you know if your planner will be formulating their own solutions or implementing company agreed solutions. Typically companywide solutions have more due diligence and ongoing monitoring in place.

Our clients are not just numbers to us. It is important that all our team work together and know what is happening so we can be as helpful as possible when answering any client queries.

Our Answer:

We work as a team at Proposito, so although Huw will be your Financial Planner, Sarah and Jade will both assist Huw. We’ll all be aware of what is happening on your account, and this is one of the benefits of working as a small team.

Despite being small we operate an investment committee that has oversight of the range of investment solutions we offer, the preferred platforms we use and several other investment related tools (e.g. financial forecasting systems, risk tolerance questionnaires, etc.).

We also engage additional consultants and outsourced experts to assist us in this regard.

Bonus questions: what will you need from me?

Building and implementing a financial plan can take some time. Understanding what you can do to keep things moving along is vital in ensuring everything gets completed in a timely manner.

Why this question is important:

Being organised can signal to an advice firm that you’ll be easier to deal with. Knowing that you have work to do and making sure you get this work completed quickly is important in ensuring your plan gets implemented swiftly.

It can typically take around three months to build and implement a financial plan.

Our Answer:

Initially not much! We will look to arrange a chat so you can tell us all about yourself. We’ll ask you some questions and explore the areas that you’re looking to get help with. Towards the end of this first meeting we’ll let you know about how we work, what happens next and what we think the fee will be.

We hope the information in this and in our earlier blog will be useful to you when it comes to exploring financial planning. Think of it as a job interview: you ask the questions of the financial advisers, and if you like the answers then you may want to go on to engage their services.

In the meantime, if you would like to chat to our team you can contact us by emailing hello@proposito.co.uk or calling our Cirencester office on 01285 708444.