In some ways, being a financial adviser is like being a bouncer. 

Of course, a good financial adviser does a lot of positive work. He or she can help clients get a clear picture of their financial and lifestyle goals and helps them to achieve these. 

But another important role for a financial adviser is to stop bad things from happening. A good financial adviser can act as a bouncer to keep bad ideas infecting a client’s financial strategy or by helping clients minimise the likelihood of bad outcomes. 

A financial adviser can act as a bouncer in a number of ways:

  • Helping clients to see the risks involved with speculative ventures, which might have a terrific upside, but also have the potential to turn a large fortune into a small fortune. At the very least, being a “devil’s advocate” for projects such as excessive property investment or buying into businesses such as restaurants, bars, or vineyards. 
  • Helping clients to manage risks such as premature death or inability to work that could be financially catastrophic to them or their loved ones, by recommending suitable insurance.
  • Keeping bad investments out of a client’s portfolio. Investments could be bad because of any number of factors. There could be counterparty risk. The investment strategies may not be sound or too opaque. It could be as simple as fees being too high.

In my view, some financial advisers are better bouncers than others. Some have a better understanding of the broader risks to which people are exposed. Some are better able to act as devil’s advocates and challenge their clients and the assumptions their clients are making.

And advisers have different types of institutional constraints. Being independent, for example, lets me keep certain products away from clients, which might slip through the door if I had an affiliation with the product issuer.  

Check out this other related article!

If you think you need a financial bouncer, especially one who does not have any conflicts of interests, check out my financial advice business Fairhaven Wealth and contact me! 

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).