Money & Power

How to Grow Your Money: A Complete Guide to Getting A Financial Planner

Money that sits in the bank loses value, but if you entrust someone to invest your money, it can build your wealth in the long run.
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  • Hiring a financial advisor can help you grow your fortune through investments.
  • In choosing a financial planner, look past titles and examine credentials, track record, and experience.
  • Financial planners charge between $1,000 and $2,000 for a comprehensive financial plan, and for ongoing advice, clients pay a monthly retainer of a couple hundred dollars.

You know what’s harder than making a fortune? Holding on to it.

Many lottery winners can tell you how they were in over their heads and how they lost the millions they won (and in some cases, more) because they did not do one thing: Hire a financial advisor.

Having a financial advisor is pretty commonplace in countries like Australia, Hong Kong, and the United States, but here in the Philippines, many people wait until they have built up sizable wealth before considering hiring one.

Professionals agree almost everyone could benefit from working with a financial planner. After all, money saved in a bank loses value, when inflation is 600 percent higher than the interest rate it earns. But money invested? That’s where you can build an even greater fortune and preserve your wealth for the next generation.

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What is a financial planner? He or she is a professional who helps clients—both individuals or corporations—meet their medium and long-term financial goals while balancing them with short term needs by using the financial planning process. 

A financial planner will work with you to determine your point A and B—point A meaning where you are now, and point B which is where you want to be. It’s common for people to have more than one point B; one could be retirement, another education overseas for the children, another a vacation home, and so on. It’s also possible to have midpoints between A and B. With all these complications, having an objective professional on your side can only help. 

Melvin Esteban left a lucrative career in banking and insurance to set up his own financial planning company. He saw a need in the market and wanted to mine it, and was pleasantly surprised that the demand was greater than his most optimistic projections. Below, he offers welcome tips if you are shopping for a financial planner, or simply looking for someone whom you can trust to grow your money. 

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More: The Formula for 'Real Wealth' and How Much You Need to Be Happy, According to a Private Banker

It’s never too late, but it’s never too early too.

Asked when is the best time to hire on a financial planner, Esteban says: “As early as possible even if your wealth is still very limited. Remember, it’s a financial planner’s role to help build your nest egg and let it grow. The most common misconception is that you should already have a lot of money to get a financial planner. Instead, a financial planner can be your partner in guiding you as you build your wealth.”

Can I see your ID, erm credentials?

Choosing a professional financial planner is harder here at home compared to other countries. That’s because there is no governing body in the Philippines for one to be recognized as a professional financial planner. “There are private groups or companies that provide certification but they do not follow standardized criteria. The biggest challenge, however, is that the vast majority can just easily claim to be one,” cautions Esteban.

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His advice: “Don’t just look at titles or designations. Look past them and examine credentials, track record, and experience. References count a lot so call past and current clients.” 

One more thing: Ensure your financial advisor can be held to fiduciary obligations. In the United States, a fiduciary duty is the legal term describing the relationship between two parties that obligates one (in this case the financial planner) to act solely in the interest of the other. 

How much do financial planners cost?

With no governing body, there is no one policing the fees and rates financial planners can charge their clients here. As a benchmark, let’s look to the United States again. Financial planners charge between $1,000 and $2,000 for a comprehensive financial plan, and for ongoing advice, clients pay a monthly retainer of a couple hundred dollars.

But not all financial advisors are created equal, and you have to pay more for specialized services. Investment advisors typically charge a fee equal to a percentage of invested assets. According to CNBC.com, registered investment advisors charge 0.99 percent for the assets they manage. So if you have $100,000 to invest, that’s $1,000 a year. If you have $1 million, the fee would jump to $10,000, although some advisors have a fee structure in which the percentage slides down as your assets grow.

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Then there are financial advisors who don’t charge you, but that’s because they earn their fees from banks and investment companies that they represent. And yes, they offer “free” advice, but that’s because they earn commissions from the investments they sell you. In this case, you’ll need to be wary with whom their loyalties lie. 

Once hired, how can a financial planner be of service to you?

When you have engaged the services of a financial planner, his first job is to understand your fiscal status so be ready to share your liquid assets, which for the wealthy, tend to be spread around banks and other financial firms. Banks that cater to the affluent do offer wealth management services, but the problem is they can only look at the money you have with them. So it’s a bit like asking someone how you look, but they can only see your face or your arms or feet. 

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Once your financial planner understands your liquid portfolio, his next challenge is to understand your financial goals—short, medium, and long-term. From there, he has to set up a program to meet these goals and monitor them in a timely manner. The latter is critical as market changes may require you to shift your portfolios. Life stages also tend to alter a person’s risk appetite, say when you are younger you are okay to take risks, but not so much in your 50s.

“A planner may work with you on a single financial issue but within the context of your overall situation or do a comprehensive one. This big-picture approach to your financial goals sets the planner apart from other financial advisers, who may have been trained to focus on a particular area of your financial life. A financial planner should have a strong grasp of tax planning, investments, asset allocation, risk management, retirement and estate planning,” explains Esteban.

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With or without a financial planner, how can I better follow my money?

Esteban points out banks and insurance companies charge fees. “Of course, other than the distribution cost that they need to incur, they also need to make money. The fees however varies from bank to bank, insurance company to insurance company, and even product to product.”

To know if you are getting a good deal, always ask for all fees that your investment will incur. There are at least three common fees: (1) entry fees, which can range from as low a 0 percent to as high as 5 percent; (2) premium charge, again can be as low as 0 percent to 100 percent of the first year premium and even extend beyond the first year; and (3) management fees, which can range from 1 to 2.5 percent annually. All these fees should be in the proposal or presentation, but they can be in fine print so make sure to ask.

Ask about penalties too if you have to pull out your investment for emergency needs, plus convenience of redemption. You will need to know how long a wait you have before you can get your money back. And it goes without saying, do not sign anything unless you have read it and fully understand it.

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More: A Beginner's Guide to Investing: Don't Rely on 'Hot Tips'

Learning to Invest: In life and in investments, there are no guarantees.

When someone promises you high returns and low or no risk, Esteban advises: “walk away. There is no such thing.”

“Before you make any investment, first you need to examine your personal risk appetite. Please do not focus on returns or the possibility of high returns. There is no point in making a 15 percent return if you’re just going to use that to pay for your hospital bills later on because you were stressed from tracking market volatility.”

Instead, understand what investments are available and match them with your investment philosophy. Understand the volatility of each. It’s also important to know that past performance is just that—past performance—so there are no guarantees when it comes to absolute returns. 

Independent versus tied advice

At weLEAD, Esteban’s advisory firm, he admits most of its clients are affluent and high net worth individuals. “But from time to time, we’re approached by individuals who are just starting to set up their financial plan and I welcome that challenge too.”

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“Because we are independent practitioners, it’s easier for us to act in the best interests of our clients. We provide an unbiased approach to all financial instruments we recommend. We do not and will not represent any specific investment firm, insurance company, or financial institution. Nor do we sell any specific set of products, accept commissions, referral fees or sales incentives from third parties. Our professional fees are fixed and designed to be fully aligned with the services our clients’ require in order to fulfill their goals.” 

He is excited to build a bigger team and break new ground in independent financial planning. “This year, we’ve taken in some aspiring financial advisors in our mentoring program and we hand hold our mentees for a whole year as they learn the trade of being a financial advisor," he says. The biggest challenge for an advisor is making a real connection with his or her client, and applying what was learned in the classroom to real-life situations and money.

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Even with a financial advisor, make sure you stay engaged. It is your money after all and the best person you can trust with it is yourself.

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Aneth Ng-Lim
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