How to ensure your financial adviser is right for you

Personal finance expert Noel Whittaker tells how to choose a financial adviser and what you should expect to pay.

How to ensure your financial adviser is right for you

Given everyone’s superannuation accounts have been ravaged by the coronavirus pandemic, getting sound financial advice has never been more pivotal. Personal finance expert Noel Whittaker offers the following guidance on how to choose a financial adviser and what you should expect to pay.

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How to choose the right adviser?
What should you look for in an adviser? First, you need someone who is knowledgeable in the area you need advice in. For complex areas, such as aged care, running a self-managed superannuation fund or salary packaging, you should seek out an adviser who specialises in the field you are after.

Second, make sure the adviser is licensed to provide advice, so take the time to understand their background and education. The financial adviser register on the ASIC MoneySmart website allows you to check if an adviser is licensed, has the appropriate qualifications – and if they have had any disqualifications.

Third, look for a personality fit. There is no point having an adviser with a string of qualifications if you don’t work well together. You are looking for someone with whom you can have a productive and interactive relationship for many years. While you want someone with some experience, consider your own age, and avoid picking an adviser who is about to retire.

Also, I think it’s a good idea to ask them where they invest their own money.

Some advisers offer a free initial consultation to see if their services and personality are compatible with the potential client. Usually, this would be a 15-minute chat to determine what the client is seeking to achieve, whether the adviser can be part of that, and whether there is a good fit between the people.

However, if you are looking for a detailed proposal, it may involve several hours of research for the adviser and they may well charge a fee. Often, the fee will be refunded if the client goes ahead with the adviser’s recommendations.

I’ve always preferred a quick chat to start the process — it can save a lot of time on both sides if it becomes obvious quickly that what you are looking for is not the province of this particular adviser.

Paying for financial advice
Costs of financial advice vary. In response to recent rule changes, most advisers now work on a fee-for-service basis, like an accountant or solicitor. Previously, many advisers worked on a commission basis, so no upfront payment was necessary. However, it is still common for the fee to be deducted from the investments, which saves the client the necessity of having to find the money upfront.

The over-regulation of the financial advice sector means that every interview requires a mass of research and paperwork, which currently costs the client at least $3000. Because of this initial cost, some advisers said a potential client needs at least $200,000 to invest before seeking specific financial advice, but there is no hard and fast rule.

In an ongoing relationship, it is common to pay a flat annual fee, based on regular reviews of your situation.

I am regularly asked what is a reasonable fee, but there is no standard answer as it depends on the amount of work involved, the complexities of the investments and the client’s structure. Obviously, the more complex your situation the more you can expect to pay. Advisers are required to show all fees in detail: the main thing is to understand these clearly from the outset, then to make sure you are getting value for the fees. If at any stage you think the fees are excessive, or are not giving the value you hoped for, talk to your adviser.

Have you been moved to seek financial advice in the past few weeks?

Making Money Made Simple – the ultimate guide to finance and investment in the 21st century, by Noel Whittaker, is available from all good bookshops.

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    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

    To make a comment, please register or login
    54-11
    8th Apr 2020
    10:55am
    Don't touch any of these scammers - all they do is line their own pockets at your expense. Do your own research and make your own judgements. No-one else cares about your money more than you do (unless they have their hands deep in your pockets, as so-called financial advisers do).
    BillW41
    28th Apr 2020
    7:05pm
    I have never put much store in advisers, even although, as a banker, I nearly became one myself. I refused the offer and stuck with department management. However, after retirement I had an adviser for a short while whose advice effectively lost me $50K in the GFC. Since then have been my own adviser, still losing $9K this time around. Could have been worse. Have reduced my annuity payments to try and arrest the erosion of principal.


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