Working with a financial adviser
It's your financial plan
Your relationship with a financial adviser may be a one-off
encounter, or it may be ongoing. Whichever you choose, it's
important to stay actively engaged with the financial advice, after
all, it's your financial plan.
Your first meeting with a
It's important to give your adviser accurate information at the
first meeting. If you're not honest with them, or if you leave
something out, you could get advice that's wrong for your
situation. Tell the adviser if you can only give limited or
Be clear about the scope of the advice. Are you expecting the
adviser to prepare a broad financial plan or do you want advice on
a particular area of your finances?
So your adviser can get a clear picture of your financial
situation, they'll want to know about your:
- financial goals - what you want to achieve
(e.g. pay off your mortgage or save for retirement)
- assets - what you own, including your home,
savings, super, car, shares and other investments
- liabilities - what you owe, including
mortgages, loans and outstanding credit card balances
- income - from all
- regular expenses - the budget planner
can help summarise these
- insurances - what assets you currently have
insured and for how much
- estate plan - whether you
have an up-to-date will and/or power of attorney.
Part of developing an investing plan is considering how much
risk you're prepared to accept to reach your goals. Any investment
your adviser recommends should suit your investment timeframe and
involve a level of risk you're comfortable with.
Your attitude to risk can change with time and circumstances. If
you've agreed to receive ongoing advice, tell your adviser if your
ability or willingness to take on investment risk changes.
For more information see risk and return.
Judging your financial
It's easy to be swayed by an adviser's confidence,
approachability and friendliness. Don't let this affect how you
judge the first meeting. Here are some things to consider before
you go any further with the relationship.
Signs the meeting has gone well
The first meeting with a financial adviser has generally gone
well if the adviser:
- asks you about your circumstances and helps you identify your
- explains the scope of the advice they can provide and what it
- is happy to explain complicated financial concepts until you
- appears to understand your situation, needs and goals.
Signs you should consider a different adviser
You should reconsider your choice of adviser if they:
- pressure you to sign documents that you haven't read or don't
- don't ask about or listen to what you want
- seem to be pushing one solution (such as a specific product or
self-managed super fund), regardless of your needs
- cannot adequately explain why a particular strategy is
appropriate for you.
Assessing a Statement of Advice
Your adviser will consider your situation and put together some
recommendations in a written document called a Statement of Advice (SOA). They will
discuss their recommendations, often at a face-to-face meeting, and
explain why they have chosen one path or product over another.
You should also receive a product disclosure statement (PDS) for
each recommended product. Don't sign or agree to anything until you
have read and understand these documents.
Go through the advice carefully, starting with the overall
strategy and then moving on to the detail. You may prefer to do
this at home, in your own time, so you don't feel rushed.
Write down any questions that come to mind as you read the SOA
and PDS so you can ask your adviser to clarify these before you
implement the advice.
Some things to look for in the SOA include:
- Needs and objectives - Does it address your
goals and personal circumstances, or does it seem generic, like it
could have been written for anyone?
- Financial details - Does it
accurately refer to your assets, liabilities, income and
- Risk tolerance - Does the
stated risk profile seem appropriate for you?
- Scope - Is there an explanation of what the
advice does and doesn't cover?
- Options - Does it compare more than one
strategic option, and outline the advantages and disadvantages of
- Cash flow - Does it show
(where relevant) how the recommended strategy will fit your income
- Products - If product recommendations are
included, is it clear how they fit into the overall strategy, why
they are appropriate for your risk tolerance, and what you could
gain or lose by accepting the recommendations?
Don't feel pressured to accept the adviser's recommendations. If
you're unhappy with any aspect of the advice or service, talk it
over with the adviser.
If you're still not satisfied, you can make a complaint. For
more information, see problems with a financial
Master trusts and wraps
Master trusts and wraps are investment structures that allow you
to hold a portfolio of investments under one umbrella. They provide
centralised reporting and are often used by financial advisers as
an easy way to manage their client's portfolio. This may lower
costs as buying, selling, and reporting is much simpler.
Watch out for up-front fees when moving an existing
investment to a wrap or master trust. Ask your adviser if any fees
can be reduced or rebated to you.
Master trusts typically have the following features:
- Investments are held by a trustee in its name, on behalf of the
- The value of an investor's account is determined by the
trustee, based on the value of the underlying investments.
- Fees and some taxes are bundled into the unit price of
investments and allocated to each investor.
- Income from underlying assets is paid to the trust and then
distributed to members.
- Franking credits are incorporated into the unit price of the
- The underlying wholesale funds are usually specific to that
master trust which means they are not portable. If you want to
change your investment, you'll need to sell it, which may trigger a
capital gain, which you may be taxed on.
Wraps typically have the following features:
- They are operated by a trustee but the investor retains
beneficial ownership of the underlying assets.
- The value of a member's investment is determined by the
- A cash account is used for each member for income and expenses
to pass through.
- Fees and taxes are unbundled from the unit price and disclosed
- Any income from the underlying investments is paid into a
member's cash account.
- Franking credits are distributed to individual investors
through the cash account.
- Members' assets are portable, making it easy for an investor to
change wrap services.
Pros and cons of master trusts and wraps
Although master trusts and wraps have different structures, most
of these pros and cons are common to both.
- Access to wholesale funds - You can
access a wide range of wholesale funds that you may not be able to
- Cost - Having all your investments under
the one umbrella may reduce your investment costs and financial
advice costs as the administration service makes buying, selling,
and reporting much simpler.
- Online access - You can usually check
your investments online at any time.
- Portability - With a wrap service you own
the underlying investments which gives you the flexibility to move
them into or out of a wrap service.
- Suitability - If you are only invested in
one or two diversified multi-manager funds, for example growth funds, you may paying costs for an
administration structure you don't need.
- Cost - Fees may include administration
fees, fees for moving money in and out, management fees for
investment options, and service fees. Fees reduce the money you can
invest and will impact the value of your investment over time so
make sure you only pay for services and features you need.
- Lack of portability - A master trust
usually consists of investments in managed funds that are specific
to that master trust, which means if you want to change advisers
you may have to sell your investment, which could result in a
capital gain. Ask your adviser how many advice firms use this brand
of master trust. A 'unique' offering may be a
Cash management and managed
A cash management account is a transaction account used to hold
surplus funds to actively manage your investments. If you have
given your financial adviser access to this account (known as a
'third party authority') so they can buy and sell securities on
your behalf, it is known as a 'managed discretionary account'.
Make sure you understand exactly what type of authority your
adviser has and the risks associated with it.
Types of adviser third party authorities
Third party authorities can be classified by the amount of
access you give your adviser:
- View access - your adviser can see the account
transactions but cannot operate the account.
- Withdrawal access - your adviser can make
transactions, including withdrawals, on the account.
- Complete access - your adviser can do all the
things you can do with the account, including changing contact
details, changing or adding authorised signatories or closing the
The risks of giving your adviser third party authority
Giving your adviser access to your account places a lot of trust
in them. You risk having your money invested in products that may
not be suitable for you, and make it easier for your adviser to
commit fraud, even if this is a remote risk. See ASIC's media release on a
former stockbroker who dishonestly used clients' funds.
You can limit your risks by:
- understanding the level of authority you have given your
- getting all account details, including any authorities you have
provided, in writing
- insisting on being notified when your adviser makes a
transaction on your account
- making sure you receive all correspondence relating to the
account, even if your adviser also receives the information
- regularly checking the account transactions and talking to your
bank if something doesn't look right.
If you have agreed to ongoing advice, you should get a review of
your financial plan, at least annually, to make sure it's still
appropriate for you.
Your annual advice review should include discussions with your
- any changes to your goals, personal circumstances or financial
situation (including income, expenses, assets or liabilities)
- whether your current personal insurance cover is still
- how you are tracking against your goals
- whether you could be affected by any changes to legislation,
the economy, or financial products
- whether any adjustments need to be made to your financial
After your annual review, you should receive a new SOA or Record of Advice (ROA) if any changes
have been made to your financial plan.
Use the yearly review as an opportunity to think about whether
you're getting value for your ongoing advice fee. See financial
advice costs for more information.
Updating your adviser between reviews
It's important to update your adviser about any changes in your
circumstances so they can adjust your plan to keep it relevant to
Your adviser should keep you updated about any changes to the
economy, legislation or markets that impact the advice and products
they've recommended for you.
If there are any changes to your current plan, your adviser
should give you a record of their new advice.
Ending your relationship with
If you decide you no longer want ongoing financial advice, there
are some things you should consider.
Some financial products, like master
trusts for example, can only be accessed through a financial
adviser, so if you decide to end your relationship with them you
may also have to leave the products they recommended, or get a new
If you leave or switch advisers you will have to consider:
- selling and buying costs
- changes to any government assistance you're receiving
- being out of the market (which could be an advantage or
disadvantage depending on timing)
- income and capital gains tax.
If you decide to switch advisers or leave an investment product,
you need to be satisfied that it is worth the cost of doing so.
Sometimes all you'll need from an adviser is
initial advice. At other times it can be useful to have access to
their expertise on an ongoing basis. The important thing is that
you decide how much involvement you want an adviser to have and
know how much you are paying for it.
Last updated: 03 Dec 2018