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What makes you unique financially from the perspective of a financial advisor? That is the aim and thrust of this write up. It is oft heard that the financial plan can be customized to the individual yet you wonder how it can be so and more importantly WHAT makes it so.
Dare I claim to know you more than you know yourself? No.
This post is meant to help you understand your own financial uniqueness as well as reveal the extent by which I seek to understand you, and why it takes effort to put together multiple considerations before specific advice can be doled out. This post aims to help you to understand yourself better to ascertain if the myriad of advice out there is suitable for yourself. You are unique, like everyone else.
There is a lot of information out there. Tons of opinions out there. Current regulation does not deem financial literacy or general non specific advice, to require a license to dispense.
Let us examine the featured image picture of the post.
Personal Situation. A true appraisal for your personal situation is to have your financial statements of net worth, cash flow constructed alongside having your financial ratios computed out for analysis. This is done alongside compiling your portfolio of assets and insurance policies.
At this point, I would like to digress and use an analogy to bring up a point. For a listed company’s audited financial statements, different stakeholders will perform different analysis for their own interests sake. The bondholder will examine the interest coverage ratios and any ratios that might violate whichever applicable covenants. The focus being on the firm’s ability to payout coupons and eventually repay the debt. The shareholder may be interested in growth by examining the Chairperson statement or dividends by examining the cash flow statements. The point is that different people will analyse the financial statements differently for the slants and objectives that suit their interests accordingly; therefore be mindful of fact find conduct that aims to sell a financial product than genuine interest in achieving your financial goals and objectives. It has got to do with alignment of interest, a topic for another post.
Personal Preferences. Your goals and objectives has to be put in context and perspective with respect to your current situation that includes non quantitative information involving family relationships, level of sophistication with investments and attitudes towards money. Depending on religion, personal beliefs and values, perhaps you might be against anything that harms nature, exploits child labour or be related to tobacco or vices. Depending on past experiences, you may prefer certain types of investments because of the positive experiences like property, REITs or value investing. Similarly, negative experiences might make you refrain from certain types of investments like property, REITs or value investing. The list of investments/strategies/approaches is infinite and no way am I discriminating any.
RRTTLLU. This is my way of remembering the 7 considerations involved in developing an investment policy statement (IPS) when sitting for the CFA level 3 examination. A separate post has covered this and you can extract further details from there. As far as possible but not within my control, I aim to reduce buyer remorse through proper anticipation of unexpected liquidity constraints that lead to penalties from early termination which in essence, defeats the financial plan initially conceived.
RDMILT. This is also my way of remembering a way to establish an expected rate of return depending on the nuances of the investment and expectation. Return expectations from different asset classes are different for reasons explained in a separate post as well. Setting expectations is the easy part, how to achieve and realise the expectations are the craft parts.
Market Situation. This would be the most dynamic aspect that influences the specific advice dished out. Trends come and go. For simplicity sake, if markets are going south, short. If markets are going up, long. I am a proponent of the adaptive market hypothesis. Choosing a method first before situational appraisal is akin to putting the cart in front of the bull, really. But not every factor for consideration is wildly dynamic. Not all things in future can be anticipated accurately (Read: Wheelock and Right side of Charts). Perhaps an engineering analogy is fitting, everything is a fluid. Given enough time with applied stress, a solid’s shape deforms. New trends in dreaded disease management rub off in insurance too, like now there is more emphasis on early detection and medically intervene at early stages so early critical illness coverage have gained more acceptance with its sky pricing than before. With understanding of cancer relapses and potential for contracting another dreaded disease down the road, multipay critical illness coverage is gaining traction despite heavenly pricing.
Changes affect the specific advice, that is readily understood. Some changes can be anticipated, or are more likely, more volatile than others. Context is everything.
Facilitating decision making is what I do, but before that can be done, I make it a point to try and wear your skin and not just your shoes. That kind of makes me a lousy salesperson to be honest, but I am proud to deem myself as a good adviser from the processes and work ethics that I lay out for you learn, use and abuse.
You know what I do. Now you also know what makes you unique financially from my perspective. Want to start a financial advisory relationship with me?