New research by the Universities of Adelaide and Western Australia has found that getting financial advice can cause anxiety in a similar way as speaking with a doctor can.
Stress levels increase the more dominant an adviser is, similar to a response found in patients when decisions about their treatment are dominated by doctors, the research found. It involved hundreds of questionnaires and interviews with investors and financial advisers.
Report co-author Dr George Mihaylov, from the University of Adelaide’s International Centre for Financial Services, said advisers’ financial knowledge could act as a double-edged sword, educating clients but also creating an incentive for them to dominate the advice process.
“Dominant advisers are associated with higher client anxiety and this hampers the ability of clients to take appropriate investment risks,” he said.
“In some cases this results in overly-conservative investment decisions.”
However, not all dominant advisers should be avoided, Dr Mihaylov said, adding that some people might seek them out because they were time poor or unlikely to be affected by advice anxiety.
Financial planning has been under fire in recent years but good advisers can deliver people much more value than the fees they charge. Finding a planner who you feel comfortable with is vital and experts often recommend speaking with two or three before deciding on one.
Wealth for Life Financial Planning principal Rex Whitford said “the job of a financial planner isn’t to make clients feel stupid”.
He said the best way to find a good adviser was to ask friends who have had a planner for at least 5-10 years whether they would refer them to you.
“Find your wealthiest and most successful friend who has had a financial planner and ask them. You don’t want to ask your broke mate down the road,” he said.
Hewison Private Wealth director Chris Morcom said finding the right financial planner could be time consuming but it was important for people to understand:
- How much they would be charged for the service;
- An adviser’s areas of specialty — it made little sense to seek aged care advice from a planner who specialised in salary packaging;
- An adviser’s background, qualifications and licensing arrangements to check for potential conflicts of interest, and;
- Whether they were a certified financial planner, who has “signed up to higher levels of qualification and a higher level code of ethics”.
“It’s really important for advisers to have an open relationship with their clients where they do a lot of listening,” Mr Morcom said.
“It’s your money — you have every right to understand the reasons behind strategic and investment decisions.”
Resource From News.Com.Au