Your financial adviser, like your accountant, is one of your most important professional relationships, says Mark Johnson – you should have a rapport based on trust and mutual confidence in your goals and strategies.
The Prime Financial senior financial adviser, a 15-year veteran and partner in the firm, has known most of his 90 or so clients for at least five or 10 years, and learns about their lives and families.
“An important and rewarding part of the job is getting to know clients, their situations, and helping them along their journey,” he says.
A financial adviser is important because he or she takes a holistic look at strategy and structure for building wealth and ensuring income, avoiding pitfalls and keeping abreast of government regulations.
“The fundamental part of our role is to make sure clients have their investments in the most appropriate structure, because at the end of the day it’s the aftertax returns that people go and buy the groceries with,” Johnson says.
“It’s like most objectives – they have a better chance of realisation when you have a plan.” “I give structure and counsel; act as a voice of reason. It’s a matter of setting goals, keeping people on track and not taking too much risk, making clients aware of the dangers and pitfalls they may unwittingly enter into.
Johnson says he is acutely aware of the responsibility of tending to clients’ financial security because most have worked hard all their lives and many are now no longer working or bringing in a regular income, so rely on their investment savings. Many clients turn to financial advisers after managing their own portfolio for years and realising that their returns haven’t matched the benchmark or their expectations, Johnson says.
“One of the biggest struggles investors have at the moment is that interest rates are at one and a half per cent, so how do retirees produce a sustainable income from their nest egg without putting their financial assets at major risk? “A lot of what we do is an education process around risk.
People will say ‘I do not want risk, I want results guaranteed’, and we all know there are no guarantees in life, but there are proven ways to invest in a considered manner.”
The most important lesson Johnson has learned in his 15 years as a financial adviser is that “there are no shortcuts, there’s no such thing as a free lunch. Investing is about being committed to a strategy over a period of time, and not to get caught up with the latest trend or scheme.”
He said clients sometimes call about an opportunity that sounds too good to be true – because it is. People like the idea of a speculative investment they think will make them a lot of money, but Johnson warns them far more people have lost money on a “sure thing” or a hot tip than have made money.
It always comes back to the fundamentals, he says – does this company make a profit, does it have a track record of earnings, are the right people running it, or is it a concept stock trying to cash in on the latest fad? “Giving clients prudent advice is one thing, people taking it on board is another.
Sometimes people have just come into money for the first time and are looking for guidance, typically an inheritance or some are fortunate enough to win a lottery. So it’s an education process about how to make that money last.”
Prime’s investment philosophy stems from the fact that most clients can’t replenish their cash if it is lost, he says. “Our portfolio is dynamic in the sense that some stocks will perform in certain environments while others will lag, but the important thing is that the company is going to be there tomorrow and the next day paying a dividend.”
Mark Johnson is an Authorised Representative of Primestock Securities Ltd (AFSL 239180), a member of Prime Financial Group Ltd.