CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider (Saxo Bank). You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

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…and how they apply to choosing a professional advisor

Choosing an investment advisor is an important decision and one you should take time to make. You will need to trust them with your money, develop a close working relationship and you will need to believe they will always act in your best interest.

So how do you make this decision? I like to tell my clients to approach this decision in the same way as you would when making any decision that requires a two way, give and take relationship, such as choosing a business partner, a contractor or even a spouse!

Sometimes people are unhappy in a relationship unless they feel like they have the upper hand or have the better end of the deal. This approach can be mean and inefficient. Most of the time, it will end up backfiring.

Poor Karma

To explain this I would like to tell you a story that highlights three key qualities to look for and why these are fundamental to increasing the likelihood of a positive experience.

It’s one that I’m slightly embarrassed to share as it is one from my own life.

A few years ago I’d put on some weight and wanted to shape up. I was beginning a fitness journey, I wanted to shed the pounds and look the best I have ever looked. I had viewed a few gyms, spoke to a few personal trainers, but I ended up going to the cheapest I found and I still knocked the trainer down on his hourly rate.

He needed the money so he agreed to be my trainer but I could see he wasn’t massively happy about it. I didn’t realise that he paid a large chunk of his hourly rate to the gym and the amount that I had brought him down came straight out of his take home pay.

I felt great because I got a cheap deal!

What I didn’t realise is that in being my trainer, he tried to get the money back in other ways. Each session there was less work and more rests, eventually taking more sessions to reach my overall goal. The schedule wasn’t exactly tailored to my needs and he ended up telling me that I had to buy certain products and supplements to reach my goal (taking a slice of the profits).

By the time I eventually start looking in good shape (but not the best I could have done) he had made more than his profit lost through the cut down price. I had eventually paid more in hourly fees and products than I originally would have.

This happens far too often in modern day life. Who was in the wrong? I now believe it was me. Of course he probably shouldn’t have taken advantage of my ignorance but it is human nature when you feel taken advantage of, or that someone does not really value you.

But it taught me a valuable lesson. I’ve learned that the cheapest doesn’t necessarily mean you’re getting a good deal (quite rarely in fact). What I really took from this experience is that these types of relationships have to work both ways.

I now have the same philosophy for selecting anything from builders to solicitors, estate agents and so on. I want expert advice and a great service. I am much more comfortable knowing that both sides are happy rather than just me as I believe ultimately I will receive a better service and result.

So What Does This Have To Do With Choosing An Investment Advisor?

I’ve had a number of my clients tell me a similar story about previous financial or investment advisors that they have worked with. They didn’t do their full due diligence on the individual or the company and got seduced by a ‘good deal’. It didn’t work out well for them as the service was not really what they needed, and there was no real investment in the relationship.

So I now always advise anyone when considering going into a professional relationship with a service provider, such as an investment advisor, to make sure they pass the following three checks:

  1. A win, win deal that is good and profitable for both sides of the relationship.
  2. A good fit who brings you something useful that you need or don’t have yourself.
  3. A complimentary character who you actually like talking to!

I will illustrate this by asking you to play along a little here. Imagine you have an investment advisor. His name is Paul, and you feel he is the perfect fit for you.

A Win-Win Deal

The deal between you and Paul is a good one. He is certainly not the cheapest, yet he is not the most expensive either and you are happy to pay what he charges. You receive an exceptional service and he keeps you on track. You ask which stocks, approaches and strategies would be best for you, and you trust what he says, his research and his approach suites your needs.

There is real value in that.

A Good Fit

Paul is someone that you work very well with. In other words, you get on. He knows you do not react to being patronised and he knows how to keep you focused on your objectives.

During your conversations you speak about normal things including family, work and your mutual interests. You actually look forward to your chats, instead of dreading the feeling of inadequacy and confusion you have experienced with other finance professionals.

Don’t get yourself into a relationship with any professional advisor that you don’t enjoy dealing with. Imagine actually enjoying the conversations you have with your own ‘Paul’ and appreciating his views and opinions!

A Complimentary Character

Paul is analytical, the perfect complement to your ‘big picture’ way of thinking (if you are analytical or a different type, simply substitute this example for one that compliments your own character and play along!).

He keeps an eye on the progress that you’re making and things that you would not even think twice about. He knows you and your portfolio inside out, so he knows how to advise and educate you towards what you’re looking to achieve.

This is very reassuring to you having an advisor that knows you and your portfolio in depth, as it enables him to offer the most suitable and tailored advice he possibly can.

The Moral of This Tale? Don’t Rush In

I hope this goes a little way to help you when making a decision on any service provider, whether this is in finance or any other professional service. Ask yourself whether that ‘good deal’ is everything it promises to be, as it may not always be the best for you to always go for ‘the cheapest service’.

Do your research on the individual and the company to ensure you are comfortable that you will receive an exceptional service that is specific to your needs. The most important consideration when selecting any professional advisor you work with is that they fit well with you on each of the three factors covered here.

You’ll get more out of it, maybe even enjoy the experience! What is that worth to you?

Do you have your own way of assessing a service provider? Any tales of success or struggle? I’d love to hear them in the comments below.


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