Types of financial advice

Finding the right financial advice for you

The type of financial advice you need will depend on your stage of life, how much money you have to invest, and what you are trying to achieve.

Here we explain your financial advice options.

General financial advice

General advice does not take into account your particular circumstances, such as your objectives, financial situation and needs. For example, if an adviser gives you information about a product that might be suitable for you, but does not consider your overall financial goals or actually recommend you take up the product, it is general advice.

You can get general advice about financial products or investments from someone who holds or works for a company that has an Australian financial services (AFS) licence.

Personal financial advice

Personal financial advice considers your personal situation before making recommendations. For this kind of advice, only talk to someone who is a licensed financial adviser. See choosing a financial adviser for more information.

The cost of the advice will depend on the scope and kind of advice you receive.

Types of personal advice

There are different types of personal financial advice you can receive from an adviser:

  • Simple, single-issue advice - helps with a particular financial issue, for example, the best way to make personal super contributions. You may be able to work out some of these simple issues for yourself, for example, by using the super contributions optimiser to work out the best way for you to make personal super contributions.
  • Comprehensive financial advice - involves developing a comprehensive financial plan to help you set and achieve financial goals. It will cover things like saving, investments, insurance and superannuation and retirement planning. This sort of plan should be monitored and adjusted over time.
  • Ongoing advice - your adviser will regularly monitor and review your financial plan on a to help you manage your financial affairs. The frequency of reviews and how you pay for them should be mutually agreed when you start working with a financial adviser. Make sure you understand exactly what your ongoing fees cover.

Different ways to get advice

The way you get advice may depend on your needs, practical considerations and how comfortable you are with various advice methods:

  • Face-to-face advice - suitable for holistic advice or more complex issues, where it is practical to meet with an adviser.
  • Phone-based advice - often used for single-issue personal advice or general advice, in conjunction with a follow up email or letter.
  • Video chat or conferencing - allows people in rural and remote areas, or those who have difficulty travelling, to receive face-to-face advice on a broader range of issues.
  • Robo-advice - computer generated advice which may be suitable for simple advice, such as choosing appropriate investments.

Robo-advice

Robo-advice (also known as digital financial product advice or automated advice) is financial advice delivered by a computer, instead of a human financial adviser. You enter certain details into a computer program and, based on this information, it generates financial advice.

A robo-adviser offering financial product advice needs to have an AFS licence or be a representative of an AFS licensee.

How robo-advice works

Digital advice is still developing in Australia, but this is how it currently works for different types of financial advice.

Personal advice

When you register with a digital advice website, you log in to answer questions about your income and expenses, assets and liabilities, goals, objectives and risk tolerance. This gives the robo-adviser information about your financial situation and aspirations. The computer algorithm then considers this information before making recommendations.

The robo-adviser produces an automated Statement of Advice (SOA) which explains the recommendations and other important information.

General advice

When a robo-adviser only gives general advice, you will not be asked about your personal circumstances. Therefore, these won't be considered, and you won't receive an SOA.

You must be told upfront that you are only receiving general advice.

When you receive general advice, you'll need to decide whether the recommendation is appropriate for you, taking into account your goals, objectives and risk tolerance, before acting on the information. If you decide to act on the general advice and it is not suitable for you, you may not get the results you want from your investments.

Robo advice costs

This style of advice may have lower advice fees than traditional financial advisers as they are not using people to assess your needs.

You may be charged on a fee-for-service basis, and/or a percentage fee based on assets under management if you choose to implement the recommendations.

You may also be charged a subscription fee for ongoing services, including regular newsletters or updates. The financial services guide (FSG) and SOA should outline all the fees you will pay for the advice.

Things to consider before getting robo-advice

Unlike a person, a computer will not clarify your goals or objectives, discuss any issues with you or make adjustments if your life is not going to plan. Here's a few other things to think about before you decide on robo-advice.

  • Advice limitations - Currently, most robo-advisers only offer a narrow range of services.
  • Data input - The advice you receive from a digital advice tool will only be as good as the information you enter.
  • Updating advice - Find out if and how your advice will be updated if your circumstances or financial goals change.
  • Portfolio rebalancing - If you allow the robo-adviser to automatically adjust your asset allocation, know when and why the rebalancing will occur, and if there will be any costs or tax implications of rebalancing your portfolio.
  • Questioning advice - Because you're not dealing with a real person, you may not have a chance to ask questions. If you don't understand the advice, it may be harder to decide whether it's right for you.
  • Fees and other costs - Before you agree to robo-advice, it's important to understand the upfront and ongoing costs of the advice, and when you'll be paying fees.
  • Withdrawal - Find out whether you can withdraw from the service or any recommended products, and if there are restrictions on withdrawals or costs involved.
  • Dispute resolution - If you are unhappy with the service you receive, what is the dispute resolution process? See how to complain for more information about lodging a complaint about a financial adviser or financial service.

There are many ways to access financial advice, whether you want it on an ad hoc basis, whether you want to develop an ongoing relationship with an adviser, or use robo-advice. Consider your advice needs and what you are prepared to pay to help work out the best option for you.


Related links


Last updated: 05 Dec 2018