How to pick the right financial adviser
Whether you’re making a major purchase, setting long-term financial goals or creating important legal documents, professional help may just be what you need. 2.1 million adults in Australia are expected to entrust a financial adviser to help manage their wealth in the next two years, according to Investment Trends.
However, it can be hard to know where to turn for advice, especially when our trust in financial planners and banks are at an all-time low.
Here are some of the best tips on finding the right financial adviser.
Know what you’re looking for
An adviser that specialises in the area of your needs will be better equipped to assist you. Round up a shortlist of potential candidates – from personal referrals or public databases – and read up on their qualifications and experience as well as their financial services guide, which outlines their services, employers, affiliations and fees. Some advisers can provide comprehensive advice, while others only have expertise in specific fields, such as investments, insurance, tax, or home loans.
Always ensure that they have a current Australian Financial Services (AFS) licence with ASIC. Also check if they are a member of any industry association and/or professional body, as it generally requires them to follow a code of conduct and participate in ongoing training and professional development. You can also find out if they have any past misbehaviours on ASIC or the Financial Planning Association (FPA) if they are a member.
Examine your personal situation and determine whether it calls for ongoing advice or just a one-off appointment. According to CHOICE, ongoing advice is only necessary for those who have considerable assets and a sizable investment portfolio, or those whose financial life contains complex, dynamic parts.
Understand the cost
Advisers come with a range of different fee models – some may charge an upfront fee, while others ask for a percentage of your assets.
When it comes to financial advice, the procured cost can be more than just out-of-pocket. Advisers who earn their pay from commissions may limit their recommendations to certain products and professionals they can benefit from, and thus not work in your best interest.
Should this happen, ask about how their affiliations with banks or other financial institutions influence their advice and why the recommended product is better than any other options. “Just because they’re getting a commission doesn’t mean it’s not the best product for some people, you don’t want to discount it completely,” Laura Higgins from ASIC's Moneysmart told the ABC.
Most advisers have an Approved Product List (APL), which contains a collection of financial products that they have researched and been authorised to give advice on. You can ask if they could advise you on products outside of this list.
Shop around
Make time to meet face-to-face with at least two advisers for a free consultation. “If you can’t establish a good bond early on in your first meeting with a financial planner keep looking,” the FPA said.
Don’t hesitate to put your questions forward and request further information as needed. “The best way to do that is to take nothing for granted, read contracts before committing to anything, and if you don’t understand it, don’t sign it,” Michael Roberts of Bailey Roberts Group told The New Daily.
There is no need to rush and go all-in, either. Adrian Raftery, financial expert and associate professor at Deakin University told the Sydney Morning Herald that you can build trust with your adviser slowly by entrusting your assets in stages.
Below are the queries you can ask hopeful advisers:
- How do you charge for services?
- How do you get paid?
- What areas do you specialise in?
- What type of clients do you usually see?
- Do you advise only on in-house products?
- How will my investments be monitored?
- What financial institutions do you have a relationship with, if any? How do you benefit from this relationship?
- Why do you recommend this product?