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Questions to ask your Financial Advisor

Jason Swan

When you meet with a Financial Adviser, it is worth preparing some questions beforehand so that you understand the services being offered, and how the Adviser may be able to assist you. So, let's run through a list of questions you should ask any Financial Adviser that you are considering working with.


1. Are you completely unbiased, or are you restricted to specific investment companies and funds? Many of our clients that come to us holding the same kind of Policies that are managed by the exact same Investment Manager. It is worth asking the question: How can a one company and one investment manager be the best fit for all clients with a wide range of objectives, risk tolerance and circumstances? If this doesn't seem correct to you it is probably worth reviewing your situation to understand whether you have been given unbiased advice tailored to your own needs and circumstances.

2. What qualifications do you have to give financial advice?

Many advisers work in Portugal without relevant professional qualifications. You should ask your adviser to demonstrate the qualifications they hold to ensure they are academically equipped to provide advice at the highest levels. Those from the United Kingdom may be aware that a Chartered Financial Planner is the gold standard for providing Financial Advice and that a 'level 4' qualification is the minimum requirement.

3. Have you told me everything there is to know about the charges?

This is a controversial subject for many firms at the moment. This is because of an EU directive that means there must be full transparency on all costs relating to investments and Financial Advice. In many cases we have found that our clients were not aware of the true costs of their investments which has resulted in dissatisfaction and under-performance owing to sky-high ongoing investment charges.

4. How long will my money last during retirement?

Does your financial advisor tell you how long your money will last during retirement? Many people invest a capital sum and use this to make withdrawals to supplement their other retirement income. Ask your adviser to “stress test” your current portfolio and provide you with a simulation of how long your capital sum will last before it is exhausted.

5. Is my fund performing well? Are the costs providing value for money?

Funds are often recommended if the manager has a track record of delivering excellent returns relative to the market. But, are the fund managers doing their job well, and is the price tag justified? Ongoing management fees are built into every fund and should be explicit, however costs can vary hugely – we have seen fees of up to 2.71% per annum – when the average in the market is currently around 0.75%. Reviewing the performance and charges of your investment may save you thousands per annum – or even hundreds of thousands over the longer term.

6. How much of a chance am I taking?

Consider the level of risk being taken with your money, rather than focusing solely on potential rewards. For example, two portfolios can both have a 5% annual return, but fund 1 could lose 50% of its value at any time during the year, whereas fund 2 only has the potential to lose 10%. These are clearly two very different investments, with fund 2 being the better option.

7. If you own or are being recommended a Life Insurance Bond – what is the cost?

The charges deducted from Life Insurance Bonds such as Portuguese Compliant Accounts can be excessive, and frequently erode the returns generated by your investment. Often, these are 'bundled' or paid for separately from the product and sometime are not clear or transparent – especially on older policies. Request a written analysis of each fund's 'Ongoing Fund Charge,' product costs, and the fees or commissions your adviser is receiving, as well as where they are being paid from.


8. What is your investment philosophy?

It's vital that you and your advisor are on the same page when it comes to investing. Your investment style and that of your advisor must also be compatible. If you care about impact investing, for example, you should ask your advisor if he or she can help you build a portfolio that is in line with your ethical position.

9. Which asset allocation strategy will you employ?

You may be aware that a diversified portfolio is essential to manage ongoing risk. The way you build a diversified portfolio is through asset allocation. Asset Allocation is proven to be responsible for the vast majority of returns generated from an investment portfolio – not individual fund performance as many people believe. Your adviser should be able to help construct a portfolio using assets such as equities (shares), bonds, property and cash. The proportion in which these assets are held can be varied according to the amount of risk you wish to take, or not as the case may be. Conclusion Ensure you use a qualified, experienced and transparent advisory firm that informs you about all the fees and charges payable, and who can construct a portfolio suitable for your lifestyle and objectives. It is important you review any existing investments held to ensure the ongoing costs and investment performance are providing you with value for money.

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