Choosing a financial adviser

Finding an adviser that suits you

A good financial adviser will help you set your financial goals and create a plan to achieve them. Here are some tips on how to find the right financial adviser for you, and some questions to ask.

Finding an adviser to suit your needs

Once you have identified your financial advice needs, you can look for an adviser who offers the services you are looking for.

One way to find an adviser is to conduct an internet search for information about an adviser or the business they work for.

Alternatively, you could use a 'find an adviser' service through an industry association, which can help you find an adviser in your area. Most associations require members to participate in ongoing training, follow a code of conduct, and have a mechanism for handling complaints.

To get you started, here are two examples of 'find an adviser' services:

Important: ASIC's role

ASIC is Australia's corporate, markets and financial services regulator. They have developed MoneySmart to provide general information and tools to help you manage your money and make financial decisions. ASIC cannot give personal financial advice or endorse or recommend a financial adviser.

 Check the financial advisers register

When you have a short list of advisers, it's important to check their history, qualifications and current employment status before you approach them about getting advice.

The register tells you:

  • the adviser's qualifications, experience and employment history
  • the types of products the adviser can provide advice on
  • if the adviser is a member of a relevant professional body or industry association
  • whether the adviser has been the subject of disciplinary action by ASIC
  • the name and number of the Australian financial services (AFS) licence holder who employs or authorises the financial adviser to provide advice
  • details about who owns or controls the licence holder.

Check your adviser is licensed to provide the type of advice you want.

Financial advisers register

If the adviser is not operating under a licence, do not deal with them - they are breaking the law and you will have little protection if things go wrong.

Get a financial services guide

Read the financial services guide (FSG) of any financial advisers you are seriously considering. You can find the guide on their website or ask them for a copy.

The guide will tell you:

  • what services the adviser offers
  • how they charge and whether they receive any additional payments or benefits
  • who owns the company that employs the adviser
  • if they have links to a product provider, such as a bank, fund manager or life insurance company, that may affect the products and services they offer
  • their AFS licence number.

General questions for a financial adviser

When choosing an adviser, you'll want to know if they have the right qualifications and experience to help you achieve your financial goals.

Qualifications

Advisers who hold an advanced diploma or degree qualification in a relevant discipline, like finance, economics, accounting or financial planning, are better qualified to give advice than someone who has only met minimum training requirements.

From 1 January 2019, new advisers must have a relevant bachelor's degree or higher, pass an exam, have completed a professional year and meet ongoing continued professional development (CPD) requirements. For more information, see ASIC's financial adviser reforms.

Q: What are your qualifications? How long did it take you to get them?

Tip: The adviser should tell you about the subjects they've studied and the length of any courses they've done. A diploma, advanced diploma or degree qualification in finance, economics, accounting or financial planning in desirable. As a general guide, the longer a course of study the more comprehensive the course content.

Q: Can you advise on my current products?

Tip: It's important for you to determine if the adviser is restricted to only giving advice about products on their approved product list. For example, can they give advice in relation to your current super fund or managed fund?

Experience

Ask the adviser about their typical clients, to see if they have experience dealing with people who have similar issues and goals to you. For example, are the adviser's other clients planning for retirement or are they young families wanting to save for their children's education? Ask how long they have been working as an adviser, this may be important if you are looking for complex or comprehensive advice.

Ongoing professional development

Like other professionals, an adviser should keep up with industry or regulatory changes that might affect their clients. They should participate in regular training activities, to maintain CPD requirements.

Q: How do you keep up to date with changes that might affect your clients?

Tip: The adviser should tell you that they regularly attend courses or seminars run by industry associations, professional bodies, universities or registered training organisations.

Industry association membership

Check whether the adviser is a member of an industry association and/or a professional body. Most associations require members to participate in ongoing training, have a code of conduct for members to follow and a mechanism for handling complaints.

Q: Are you a member of any industry associations or professional bodies?

Tip: ASIC's financial advisers register will tell you which associations or professional bodies the adviser belongs to. If the adviser is a member, ask them what their association expects them to do to remain a member. You can also check the industry association or professional body's website for information about the adviser.

Meeting client needs

Q: How do you get to know a new client?

Tip: The adviser should talk about how they'll get a full picture of your circumstances and needs. They should explain that they need to ask questions about your current situation as well as your financial goals, both long term and short term.

Q: How do you deal with a client who has a few different financial objectives?

Tip: An adviser should help their clients prioritise their financial goals, explain and discuss their choices and develop a strategy to achieve their goals. They should also help a client refine their goals if they are not realistic and achievable.

Q: If I accept this advice, who do I speak to if I have any questions or concerns about my investments?

Tip: You should be able to contact your adviser if you have any questions or concerns about your investments. If the adviser won't meet with you or return your calls, you can complain. See problems with a financial adviser for more information.

Q: How will my investments be monitored, and what information will I receive?

Tip: If you've agreed to ongoing advice, you should receive regular reports about your investments as well as regular reviews with the adviser. Check what other updates you'll get, and when you can expect to receive them.

Don't be afraid to contact your adviser if you have any questions between reviews. Be aware that the adviser might charge you extra for services that are not part of the ongoing advice agreement that you have entered into.

Questions about financial products and sales incentives

When recommending financial products, advisers usually have an 'approved product list (APL). An APL contains financial products the advice business has researched and given their advisers authority to provide advice about. Find out whether they can advise you on your current products if they are not on their APL.

Smart tip

Make sure the adviser focuses on the services and strategies they can offer you, not the products they can sell you.

In-house products

Many APLs contain 'in-house' products, which are products provided by a related party, such as the bank or other financial institution the adviser is employed by. In-house products may create a conflict of interest for the adviser. See ASIC's media release on how large financial institutions manage these conflicts of interest.

If an adviser recommends you switch to an in-house product, ask them to explain why your existing investment is no longer suitable and how the recommended product is better. If you switch life insurance policies, make sure you aren't losing existing benefits you want to keep.

If you decide to switch to an in-house product, be aware that the adviser may receive some sort of benefit, like a performance bonus for selling you that product.

One stop shops

ASIC has seen a significant increase in advisers offering a 'one stop shop', where you have access to a number of related professional services in the one place. This may seem convenient; but the adviser may receive a monetary benefit for recommending other professionals or businesses.

For example, an adviser may recommend you set up a self-managed super fund (SMSF) with a strategy to invest in property. They then refer you to a property developer to help you find an investment property, an accountant to help you with the set up and ongoing management of the SMSF, and a lawyer to take care of the legal requirements. In this situation, it's important to be aware that the adviser may have a pre-existing business relationship with the professionals they've recommended. They may receive a referral fee or other benefits, or they could have a personal interest in the other businesses.

Q: Do you only advise on in-house products? If so, how do you make sure another product is not a better option for me?

Tip: If an adviser recommends you switch to an in-house product, you should be satisfied that they've compared the fees, charges and benefits of each product. The reasons for choosing one product over another should be documented in your Statement of Advice (SOA).

Q: What fees or other benefits do you receive for referring me to another person or business?

Tip: An adviser may benefit from a pre-existing relationship they have with the other professionals or businesses they recommend.

Q: Are you, or this financial advice business, associated with the people or businesses you're referring me to?

Tip: Check ASIC's financial advisers register to see the business names associated with the adviser or the licensee they work for.

Questions about financial advice fees

Ask for an estimate of the cost of the advice. Even a rough estimate will give you an idea of what you'll be paying.

Advisers may charge for their services on a fee-for-service basis, a percentage-of-assets basis or a combination of both. Ask for an estimate of fees for:

  • preparing the advice
  • implementing the advice
  • ongoing monitoring and advice.

Q: How are you paid? How much is your advice likely to cost? Can you give me a breakdown of the costs?

Tip: The adviser should outline what will be included in the fees you pay and whether there will be any additional costs for preparing an SOA, implementing the advice, or revisiting the advice in future years if your circumstances change.

Q: If I agree to ongoing advice, what will I get for my fees? Are the fees paid annually or monthly? Can I get the fee schedule?

Tip: Fees for ongoing advice usually include regular reviews of your circumstances and investment portfolio, and a re-balancing of your investment portfolio if necessary. You should expect to have reasonable access to your adviser when you need questions answered or want to discuss a financial issue with them.

Q: What do I do if I've been paying ongoing advice fees but haven't received an ongoing service?

Tip: ASIC has found some advisers charging for ongoing advice that they have not provided. If you are paying ongoing advice fees, make sure you get the services you paid for. If you have paid fees for services you haven't received, lodge a complaint through the bank or licensee's internal dispute resolution system as you may be entitled to a refund and compensation.

Q: How can I stop paying your ongoing advice fees if I decide I no longer want advice from you? Are there any penalties or notice periods I need to be aware of?

Tip: You can stop paying for ongoing advice at any time.

Q: Are there any other fees or charges, such as service or administration fees, that you haven't told me about?

Tip: Ask the adviser for information about the total amount you're paying in fees, and who's receiving each fee. Make sure the cost is given to you in dollars, not just a percentage of the amount you have to invest.

Q: Do you get paid to sell me a product? Do you get any other benefits such as gifts or bonuses?

Tip: An adviser may get 'soft dollar' benefits such as gifts or freebies for selling you a product. Ask them to explain what these are and their value. It's in your best interest to know if there are any incentives for the adviser to sell you a financial product.

Q: If I dispute the fees, what process do you have in place to address my concerns?

Tip: The adviser should explain how their internal dispute resolution system works. The adviser's financial services guide will also tell you how to lodge a complaint.

Video: Scott Pape's tips on choosing a financial adviser

Scott Pape's tips on choosing a financial adviser video

In this video, Scott shares his tips on what to look for when choosing a financial adviser.

Financial advice from a lawyer

In addition to professional legal services, some lawyers may offer financial or investment services. If a lawyer gives you general or personal financial advice they must be licensed. Check their details on ASIC's financial advisers register.

When you pay a lawyer for legal services, it is usually protected by a fidelity fund. However, money you give them for investing does not have the same protection, and you may not be compensated if the money is lost through fraud, theft or error.

To protect your money, never give the lawyer cash or write cheques payable to the lawyer or law firm if the money will be used for investments. Make the cheque payable to the product provider instead.

To make a complaint about the conduct of a lawyer or law firm, contact the relevant legal services commission in your state.

If you're concerned that a lawyer or law firm might be providing financial advice without a licence, you can report it to ASIC.

Don't be afraid to ask an adviser about their qualification and experience. You need to be confident they have the expertise to provide the service you are paying for. If they don't have enough experience or knowledge in a particular area, find another adviser.


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Last updated: 03 Dec 2018