Financial planning has been something most individuals put off but like preparing one’s taxes or holiday shopping one knows that they need to do it but sometimes it ends up on the back burner. When that time comes and it is time to choose a financial analyst to help and direct you through the complex financial terms, investments, rules and strategies it is tough to know who the right person for you is.
Anouk Govil is a Financial Analyst. He is also the team lead at UBS Hedge Fund Solutions. As he says, one contemplation you will want to look into is how an analyst is remunerated. The two most important ways to compensate your analyst is to pay a fee or to pay a commission.
A Fee-Only financial analyst charges customers directly for his or her advice and/or continuing management. No other financial compensation is provided, indirectly or directly, by any other institution. Fee-Only financial analysts are selling only one thing, their advice. Some analysts charge an annual percentage while others charge an annual fee, based on the value of the assets they supervise for you. Many people like this option as they feel there is less divergence of interest when ananalyst makes a suggestion to acquire or sell something. On the other hand some people feel they do not get the advice or service they deserve because once they sign up for this program the analyst gets his or her fee no matter what so some customers feel the analyst has less interest in managing their accounts.
This kind of analyst is not paid unless a customer purchase (or sometimes sells) a financial product. Many commission-based analysts are well-intentioned and well-trained. But the intrinsic potential conflict could be greater then the fee based analyst. Having said that some investors feel they get more advice and attention and with this type of analyst as he or she is continually looking at their accounts. They as the customer can then choose not to follow the suggestions being made to them but now have options to consider. Having said that, ananalyst who is remunerated solely through commissions could be said to have a conflict of interest when making suggestions.
Many individuals ask family and friends for referrals and suggestions as ‘trust’ is a big factor in choosing someone to help manage your wealth. Currently most banks and credit unions, brokerage firm all have very similar investment strategies and products to offer their clients so the playing field is pretty even when it comes to available services and products. With that in mind again it in general comes down to who you feel the most comfy with. According to Anouk Govil, every individual is different and unique and so is every financial analyst, which is why it is advisable when searching for an analyst to meet with more than one to get a feel of the different investment services, philosophies and type of person each one is.