When you search for the answer to a money problem there’s no shortage of advice givers all saying ‘trust me’! The first question that you really need answered is ‘which one should I trust’? 

Google results for ‘financial advice Australia’ return over 600 million results with some very fine and trusted people and firms offering their services but also many firms that operate on the darker side of the legal grey space surrounding financial services. 

As an industry veteran I can spot the outright dodgy from a mile away and the potentially dodgy well enough to know that more questions need to be asked. 

What I’ve found from my twenty years of meeting many everyday families looking for help after they have received poor or negligent financial advice is that there are common elements missing from all of them. 

The following is what I think you need to look for when considering who to trust in your quest for qualified and competent financial advice. It’s not an exhaustive list however it does contain the key criteria that all families that have received poor advice in the past should have asked for. 

Not all firms who lack the following will provide poor advice however just about every firm that does provide poor advice do lack the following. 

Know what to look for 

If the person you’re considering meeting with or using doesn’t have the following you should be concerned: 

  • An easy to read and understand website 
  • A process for you to provide required information and receive guidance 
  • A documented and readily available privacy policy stating how your information is treated and where it is stored and used 
  • An easy to find Financial Services Guide (FSG) which documents their qualifications, ASIC registration, who their licensee is, how they get paid and how you can complain 
  • Ask for their Approved Product List if they have one and look for links between the products on the list and their licensee. If your Financial Planner will not provide you with an Approved Product List then you should politely say no thank you and call another firm. 
  • Is there membership of a professional association such as the Financial Planning Association (FPA) 
  • What is their commitment to education? Ask for their qualifications and also if they have completed the Financial Adviser exam 
  • Look at the Adviser Register which is located on the government’s MoneySmart website. If their details aren’t on the register at all or if they are but their history looks a bit sketchy then head for the hills 
  • Look for their details on the (non-government) Adviser Ratings site, perhaps other former and current clients of theirs have provided opinions 

Broker or Planner? 

There are many people that put in a lot of time and effort doing a lot of their own research and planning their own strategies and only need assistance in putting their plans into action. A financial planner might not be the ideal person to help here and in this case perhaps using a broker would be more appropriate. 

A financial planner will take the time to understand you, your family, your money history, your purpose and goals for your money and your current financial reality. Through a process of education and coaching, your financial planner will work with you to build your financial plan and more importantly hold you accountable to making it work. 

A broker or an Agent will place a trade, charge you a fee and move on to the next person. Nothing wrong with that but it’s important to note the difference. 

What are the fees and conflicts? 

When it comes to money, it’s important to realise just how intangible it is and how even the most seasoned and sceptical person can be taken advantage of. 

Financial Planners today operate under the legal obligation to act in the best interests of their clients though it’s fair to say that it isn’t always clear if this is the case. 

I mentioned the Financial Services Guide (FSG) earlier and how there could be a link between who the licensee is and what products are available on the Approved Product List. Just because there is a link does not mean there’s a problem, it does mean though that you should understand what this link is. Financial Planners have often been rewarded by related licensees for using related products through commissions and bonuses but these are now illegal. Benefits can still flow in the following ways: 

  • Subsidised office rent 
  • Subsidised computer software 
  • Conferences 
  • Travel 
  • Gifts (though gifts over $300 are illegal) 

Again these don’t necessarily mean your adviser is not acting in your best interest, it just means you should be aware of the conflicts and ask how they are being managed. 

The big one to look out for are Managed Accounts that are ‘badged’ with either your Financial Planner’s business or their licensee brand. These are a great idea for control and efficiency for both you and your financial planner. The conflict arises because the Managed Account (the related product) can charge you a higher fee than is necessary to run the account and then legally pay the excess fees to the licensee. 

Your Financial Planner is legally bound to act in your best interests but their licensee is under no such obligation. 

Google ‘Sam Henderson financial adviser’ and see the scathing opinion of his related products resulting from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

What is their Scope? 

Remember that saying, ‘jack of all trades but a master of none’? You don’t want an adviser like this. 

Can your prospective Financial Planner do the job that you need done? What do they specialise in? Do they have other clients just like you? You might be searching for a steady hand for your upcoming retirement but your prospective adviser might be more gifted at helping young families reduce debt. 

If your prospective Financial Planner doesn’t have the expertise in the area/s that you need advice in then the professional thing for them to do is refer you to someone that does.  

Be really clear on what you want from your Financial Planner and make sure that they are really clear on what they can do for you. 

Your money worries won’t be solved by a ‘jack of all trades’ just having a go. 

Don’t be afraid, be well informed 

Fortunately, bad advisers are in the minority so the likelihood of you coming across one is low.  

The more information you have is paramount so that you can choose an adviser that is well aligned to you and your goals. 

A good Financial Planner will help you live your richest life without the money fears and anxiety so many live with. 

 

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