We know what’s going through your head – “Yeah, I’ve always thought that! Just that I don’t know as many confusing terms and jargon as they do.” Well, here’s some compelling reasons as to why you might just be a better judge of good investment decisions than them:
Have you ever bought a financial product from your financial advisor only to realise a few years later that it had been a mistake to have bought the product? In such instances, would you have felt cheated or even being dumb for buying the product – which can be unit trusts or insurance policies – in the first place?
The real question though, is this: Shouldn’t our financial advisors, who have been well trained and are supposed to be knowledgeable, know what is the best financial product for our needs? The sad truth is that the answer’s most likely no.
This is mainly because financial advisors need to classify you into a certain category by asking you to tick a few boxes and then recommend products based on the boxes you tick. The problem though, is that a real person and their financial needs are seldom as cleanly defined as a few boxes of questions. More importantly, some financial advisors would have a sales target to reach and might be pressured by their superiors to push certain products to clients regardless of their relevance to the clients’ needs. From that, it can be easy to see how there might be certain conflicts of interest between financial advisors and their clients.
Finding The Perfect Financial Advisor
Don’t get me wrong. I am not saying that there are no financial advisors who are looking after their clients’ interests. In fact, I have personally been fortunate to know a few financial advisors who truly believe in putting their clients’ interests first and put in real effort to understand their clients’ true needs.
However, just like great investments in the stock market aren’t always readily available, such financial advisors might be hard to come by. As such, we should take charge of our own financial future, or at least for parts of it. Only you will know your needs and desires better than anyone else.
We do not need to take up finance courses or read up on the history of the insurance market to be able to take charge of our financial future. What is important is to learn the basics of personal finance so that when we have to decide on purchasing a financial product, we have enough knowledge to make an informed choice on whether the product is something we truly need.
This can manifest itself in a simple situation like a financial advisor trying to sell you an actively-managed (i.e. a fund with a manager who’s making stock-picking decisions) unit trust that’s actually a closet tracker of a broad market index like the Straits Times Index(SGX: ^STI). With some basics on personal finance, you can tell him or her that it’s possible to achieve similar results in a much more cost effective way using index trackers like theSPDR Straits Times Index ETF (SGX: ES3) or the Nikko AM Singapore STI ETF (SGX: G3B).
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