Even if you have already heard about the personal financial advisory service , you are most likely having doubts about the benefits of this type of guidance.
And that’s okay, you’re not alone!
There are several myths surrounding the topic. Many still think that individuals do not need financial advice, that the value is too high, that it is not efficient in the long term and that there are conflicts of interest between the consultant and the client.
Really, all of this can be real – depending on the type of professional that is hired.
But, when the service chosen is reliable and of high quality, it can be an excellent alternative for projecting investments, learning to save, rethinking consumption habits and, of course, making dreams come true.
What is personal financial advice?
As the name implies, it is a service provided by a consultant or counselor who guides individuals on the maintenance of their finances .
Even though many believe that they are capable of managing their money on their own, several indicators point out that United State is a country with many financial illiterates. According to Ibope , only 21% of United State had some type of financial education in childhood and, of these, 45% do not usually share budget information with their children.
This is where the work of financial advisors, mentors and advisors gains prominence and importance: we need to talk (and a lot!) about money. Not as a synonym for greed or avarice, but as an instrument for achieving goals .
A personal financial consultancy can support several of these goals, such as:
- Get out of debt (or stop accumulating it)
- Investing Savings Smartly and Consciously
- Transform consumer behavior
- Organizing the inflow and outflow of money
- Take a dream trip
- Buy your dream home
- pass on an inheritance
- Choosing the best type of financing
- Quitting your job and starting your own business
Yes, these are just some examples. Objectives and targets are unlimited, but they need to be attacked individually, with a good plan of action.
Counting on the help of a finance “personal trainer” is not handing your money over to someone else: it is counting on qualified help to create a good plan .
7 myths about personal financial advice
As mentioned at the beginning of this article, it is quite common for personal consulting in the area of finance to be involved in myths and taboos.
We separate the main ones, with a challenge: take down one by one👊
“There is an infallible recipe for managing finances”
Big mistake! When we talk about money, we need to look at the whole sociocultural context behind it. In other words, a methodology can work for one person and have no effect on another.
First of all, it is necessary to identify behavioral issues , habits, individual processes, in short. Don’t create the expectation that a consultancy will bring something ready and applicable to your life. Be with open arms to create your own success formula!
“The entire effort belongs to the consulting professional”
Remember when the teacher charged you with homework? And you thought: “I have to do this so that the teacher doesn’t discount the grade”? This is childish thinking, that the tasks you do are for others.
When starting a personal financial consultancy know that yes, the hired professional will have a long effort and advice work, but the main move must come from you . It is useless to pay a consultant and, in practice, not apply the lessons learned.
“I don’t need to rethink my behavior, just organize my finances”
Having control over the inflow and outflow of money from your bank account, keeping a spreadsheet controlling fixed and variable expenses and separating a part of what you receive for emergencies are excellent ways to keep finances under control. But more than that: you need to reflect on the way you consume .
All personal financial advice is also a kind of “therapy”. This is because it provokes you to think about the root of your financial issues and problems.
“The consultant has his own interests and can harm me”
There are numerous consultants who work connected to banks and brokers, and offer free services. Generally, in these cases, there is a great conflict of interest: while the professional wants to earn a commission, when indicating a specific investment, the client actually wants to find a more advantageous solution for him.
Therefore, the ideal is to look for independent companies and service providers , unrelated to big brands. Thus, the success you achieve will also be success for the professional – who builds his reputation with good cases.
“I’m already at rock bottom, hiring a consultancy would be an extra expense”
Being at rock bottom should be a big reason for you to invest in a consultancy. Even though it may seem tight on the budget, at first, believe me: in the long run, you will thank yourself for taking this initiative.
The same is true for any other area of life. Physical health, professional life, family and love relationships. The longer you delay a transformation in search of the best, the later and more difficult it can be.
“Consulting is for those who have a lot of money and get lost in the middle of it”
Not always! Of course, a person who has a long list of possessions and a big budget needs help managing his or her own money. But this is not just for this select group.
Even those with less income can and should reflect on their financial behavior , organize their spending, think about investments and, of course, create long-term plans.
“Financial consulting is hiring someone to take care of my money”
Yes, indeed you have that option. Some consultancies have this focus and usually charge high for this type of service. But most of them are more direct: it is an orientation (short, medium or long term), so that the client can have the freedom and information to watch over his own money .
Main benefits of hiring the consulting service
Listing all the advantages of hiring a financial advisor is an almost impossible task. This is because, in addition to the benefits shared by most people who use this type of service, there are numerous improvements and individual gains, which derive from the history of each one.
To facilitate understanding, we have divided it into four major improvement groups.
- Awareness (self-knowledge)
- Understanding the relationship with money
- Analyze consumption habits
- Understanding debt formation
- Diagnose current financial health
- Education (analytical ability)
- Being able to choose good investments
- Understand the logic of the local and global economy
- Knowing how to set clear financial goals
- Ability to plan financially
- Attitude (action)
- Use practical methods of financial zeal
- Optimize time to achieve results
- Commit to following the financial organization
- Freedom (empowerment)
- Have autonomy in decision making
- End financial dependence
- Fulfill dreams in a sustainable way
Functioning of a personal financial consultancy
Obviously, the method used varies depending on the professional. However, there are practices and techniques that are generally followed in order to discover, guide and educate.
By the way, about this last part: it is essential that the contracted consultancy has an educational bias as a basis . After all, it is not enough to suggest practices, present tools and assist in setting up a plan. It is necessary to teach to “walk with your own legs”.
Consultancies that hold customers hostage to the service are very harmful and do more harm than good. This type of behavior is already noticeable at the beginning, when the professional shares the business plan with the client – when it is already possible to understand the direction of the service.
Reliable consultancies tend to follow well-defined and purposeful steps.
Diagnosis and identification
Every personal financial consultancy must have a stage dedicated to understanding the client’s reality . If we were to compare it to a doctor, for example, it would be time to request tests to understand the current situation and health status.
Likewise, the mentor must conduct an in-depth interview and identify necessary points for improvement – which are not always those pointed out by the client, initially.
At this point, it is also very important that the contracting party is as transparent as possible, demonstrating its strengths and weaknesses, and providing a complete understanding of the financial history.
Action plan and sharing
With a good understanding of the client’s profile, the consultant designs a very detailed action plan for the objectives to be achieved. For this, it uses different tools and methodologies, which vary according to the professional’s line of work.
Sharing this plan usually includes a breakdown of each step and knowledge pills on key topics. In addition, the consultant presents practical ways to deal with financial problems and issues, as well as additional content tips.
It is very important that the contractor understands the action strategies, agrees and commits to them, as the success of the consultancy depends on it. The entire action plan must be adapted to the customer’s reality .
Monitoring and support
It is also the role of the consultancy to monitor the client during the execution of its action plan . It can be initial or long-term, depending on the service contracted. In any case, it is essential that the contractor has the freedom to question, clear up doubts and even suggest changes along the way.
Ensuring the “discharge” of the client is another key point for the success of the consultancy. As you have been financially educated and understand your habits of origin, it is possible that you can proceed without the help of your advisor.
Of course, a person can hire a financial advisor more than once, and that’s not a problem. The problem is becoming dependent on a service.
How to choose a good financial advisor?
There are several points to consider when choosing the best financial advice for you. We have selected some crucial tips:
- Look for recommendations: ask your network of contacts if there are any company or professional recommendations. You can also check websites, testimonials and reviews on the internet. It is easy to see the good reputation of a consultancy: search their social networks, read comments about them and read their own content.
- Meet the consultancy: even when researching or requesting a professional recommendation, be sure to schedule an initial conversation. It is in this first contact that you can check history, training, experiences, work approaches, specializations, in short. Understand, in fact, if there is a connection with your need.
- Evaluate the service proposal: be sure to ask the professional for a detailed plan or budget. It is necessary to have a complete view of the service offered to make a conscious and intelligent hiring decision.
- Define the type of consultancy: today, with easy access to the internet, it is possible to carry out personal financial consultancy also at a distance. This is far from being a hindrance, on the contrary. It facilitates access, availability of schedules and even values.
Clarify payment methods: it is important to also agree with the professional about the John Labunski consulting payment formats. There are consultants who work on a fee or session basis. There are others that close service packages for a determined time. Analyze which one is best for you!