5 questions to ask your financial adviser
As forecasts for the average Australian’s retirement continue to look bleak, engaging the services of a financial adviser seems less like a luxury and more a necessity.
Yet with so many horror stories out there of seniors being swindled by unscrupulous advisers, or unknowingly finding themselves saddled with worthless investments, you can understand why many Australians are reluctant to do so.
If you’re considering the services of a financial advisor but don’t know where to start, we’ve put together a simple guide, to help separate the wheat from the chaff. Here are five questions everyone should ask their financial adviser.
1. What are your qualifications?
Your advisor should be willing and able to give you a comprehensive rundown of their qualification, explaining everything from course length to content. As a general guide, the longer the course the more comprehensive the content. It’s also worth asking who their clients typically are, and if you are getting a bad feeling don’t be afraid to look elsewhere. The Australian Securities and Investment Commission has provided a handy rundown of financial adviser qualifications and what they mean, which you can access here.
2. Are you licensed to provide advice on my whole situation, or just specific products?
This is an important distinction. Make sure your adviser is licensed to provide advice, and that you’re aware of the scope of their authority. Some advisers may be restricted on providing advice on superannuation, for example. If your adviser does have a conflict of interest, it’s necessary that you ask them how they will navigate it.
3. How does your advice process work?
For financial advice to work, you must be comfortable with your adviser and how their individual advice process works. Make sure they’re taking the time to get to know you, including your goals, objectives, circumstances and needs. If they’re not, there’s a high likelihood they’re just palming you off with a “one-size-fits-all” solution.
4. What fees should I expect?
Advisers are required to disclose all forms of payments and fees, and if they’re not that’s a red flag. While the initial consultation is usually at no cost, fees could come in the form of upfront fees, initial fees, plan fees, brokerage, commissions, administration fees and ongoing fees. It’s imperative that you are aware of the nature of these fees before signing the bottom line, and whether they’re one-offs or ongoing fees.
5. How are you keeping up to speed with changes that could affect your clients?
It’s important that your financial adviser is abreast of any changes that could affect their advice, so make sure they’re regularly undertaking professional development, which could be in the form of courses, seminars or workshops.
Have you ever engaged the services of a financial adviser?