What to look for in financial advice

It's your money and your decision

Your adviser will make recommendations, but you must decide if the advice is good for you. It's your money, after all.

Here we outline some things you should consider before you act on an adviser's recommendations.

Receiving the financial advice 

After your first meeting, the adviser will do some further research and put together some recommendations.

You will receive the recommendations in writing, usually at a face-to-face meeting, where the adviser will explain the recommendations and discuss the reasons for choosing one path or product over another.

You should receive:

  • A Statement of Advice (SOA) - This sets out what the adviser recommends and why they think it's suitable. It's important to review this and consider how well it meets your needs and objectives.
  • A product disclosure statement (PDS) for each recommended product - These describe the features of each product.

Do not sign or agree to anything until you have read and understand these documents.

Reviewing the advice 

It's important to check the advice to make sure it addresses your goals and takes into account your personal circumstances and financial situation.

Take the SOA home to read before you agree to anything. Advisers will often give you other paperwork to read. Be prepared to go through the advice carefully. It might help to review the advice in stages, beginning with the overall strategy and then moving on to the detail.

Write down any questions that come to mind as you read the SOA and PDS. Don't be afraid to ask the adviser to explain if you're not clear how the products or the strategy outlined in the SOA will help you achieve your financial goals.

If the SOA or PDS contains words or phrases you don't understand, use our glossary to search for a plain language definition.

What to look for in a Statement of Advice (SOA) 

Here are some tips on what to look for in the SOA.

Your situation needs and objectives 

  • Does it address the reasons you sought advice?
  • Are the recommendations customised for you or could it have been written for someone else?
  • Does it document your personal circumstances and goals?
  • Does it refer accurately to your assets, liabilities, income and expenses?
  • Does it state your risk profile and why that risk profile is appropriate for you?

 The strategy and scope 

  • Does it have a defined scope and explain what advice is and isn't being provided?
  • If your financial needs are complex, does it compare strategic options, including the advantages and disadvantages of each?
  • Does it give you cash flow projections (where relevant) to show how the recommended strategy will fit your income and expenses?

The products 

  • If it includes product recommendations, does it explain how these products fit into the overall strategy and your risk tolerance?
  • If the advice is to switch products, does it clearly explain what benefits you might gain and what you might lose as a result - for example, consolidating super might save you fees but will you lose some insurance?

Don't feel pressured to accept the adviser's recommendations. If you're unhappy with any aspect of the advice or service, you should talk it over with the adviser.

If you are still not satisfied you can make a complaint. For more information, see problems with a financial adviser.

See questions to ask a financial adviser for talking points you can use to check any of the recommendations outlined in an SOA.

Case study: Lawrence does some research before he gets advice

Mature Man With ComputerLawrence decides to see an adviser about his super. He wants to be prepared for the first meeting, so he:

  • searches for lost super on the ATO website
  • contacts his super fund and confirms his account balance, insurance cover and the fees he's paying
  • uses our superannuation calculator to get an understanding of how much he's likely to have when he retires.

When he meets with the adviser, she recommends he consolidate his super into a new fund that she says will give him better returns.

Lawrence is alarmed because the adviser asked him very few questions about his needs and objectives, and did not investigate the suitability of his existing super fund. The adviser also failed to give him an SOA or the PDS for the super fund she recommended.

Lawrence decides to take the application form for the new super fund home to review first. He also tells the adviser that he won't agree to her recommendations until he's seen an SOA and the relevant PDS.

When Lawrence investigates the recommended super fund, he discovers that the fund's investment performance was lower than the adviser said, once the fees were taken into account. Lawrence also realised that the fees were higher than his existing fund and the adviser would get a large fee to facilitate the rollover of his super. She would also get a large commission if he signed up for the life and disability insurance within the recommended fund.

Lawrence decides not to act on the advice and is very glad he reviewed it thoroughly before he agreed to the recommendations. Lawrence also decides to find another adviser.

If you don't understand why a particular investment has been recommended or the risks associated with that investment, ask the adviser to explain why it's suitable for you. If you're still not sure, don't be afraid to ask more than once.

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Last updated: 06 Mar 2018