It's crucial to recognise that financial advisers work on behalf of financial institutions when selecting one. These organisations include banks, insurance businesses, mutual fund companies, stock brokerages, and mortgage lenders, among others. Simply put, these are the businesses that provide the goods your MENA financial advisors will use to create your financial plan.
Knowing the four fundamental principles by which these organisations all function is crucial since financial advisers are greatly impacted by them. Having this knowledge will be quite beneficial when selecting a financial adviser.
This list may appear insulting at first look, as if these institutions are trying to harm you. In actuality, they are just trying to operate a business and turn a profit; if you were in their position, you would adhere to the same list. Now let's take a closer look at each of them and talk about how you can utilise this information to make your decision about a financial adviser.
1. Get Your Money
Suppose that you just started a bank. What would be the first step you would need to do to open your bank? I assume you would require deposits. How do you obtain such deposits, too? By providing what your potential customers desire in exchange for their money.
All financial organisations depend on their customers depositing money with them. They base all of their marketing and sales efforts on luring customers' cash. The financial adviser is a member of the institution's sales team, and his main responsibility is to raise capital for the company.
This is not a problem. Every party to the transaction benefits when it is done well. You receive a better interest rate or greater chance of gain than you did previously, the institution uses your money to work and profit from it, and the financial adviser earns a commission for bringing in new clients.
So keep that dynamic in mind when selecting a financial counsellor. In addition to representing the financial institution and receiving payment from them for referring you as a customer, the adviser must really work in your best interests and take the appropriate action for you. A smart financial adviser is aware that while acting in your best interests, he or she is simultaneously serving his or her own and the financial interests of the firm.
2. Get It Often
Think of yourself as the bank's president once more. How frequently do you want customers to make deposits into your bank? Right, as frequently as you can, and on a regular basis. How do you go about doing this? What if you could design a system where customers could routinely plan automatic monthly deposits of their money with you?
Direct deposit and automatic billing were developed as a result. Also, it explains why your income taxes are automatically withheld by the IRS. And you believed that was just an added convenience for you.
Yeah, these items are nice, but their real purpose is to automatically take your money each month without you having to think about it.
3. Keep Your Money As Long As Possible
Consider yourself the bank president once more for a second. When do you want customers to withdraw their funds once they have deposited money in your bank? If at all feasible, never, right? The longer the bank has their money, the greater the chance it has to earn a profit.
All of your eligible plans, including the 401(k), IRA, many Annuities, and variable life insurance policies, have extensive withdrawal penalty periods because of this. With very few exceptions, qualifying plans cannot be accessed without incurring penalties before age 59 and a half. Contracts for variable life insurance and annuities sometimes feature 15-year withdrawal penalty periods.
Simply said, there are long withdrawal penalty periods in place.
4. Give Back As Little As Possible
Consider yourself the bank president once more for a second. How much do you wish to pay back to your depositors when the time comes to really do so? Right, as little as possible What would you do to prevent them from taking that money out all at once or, better yet, to encourage them to keep it in your bank for longer? Establish withdrawal guidelines? Tax it? punish it?
Many of these plans are taxed in a way that keeps the funds as long as possible inside the plan, allowing the MENA financial advisors to use the funds permanently.
