1. Decide what you want/need from a financial advisor.
What you want and/or need from a financial advisor will depend on what stage in life you’re at, the amount of money you have (or don’t have!) and what it is that you wish to achieve.
The role of a financial advisor is to help you make financial decisions and plan your future. This could include advice about budgeting, investing, wealth strategies, superannuation, retirement planning, succession planning, estate planning, insurance and taxation.
2. Choose the type of financial advice that’s right for you.
It’s your choice on whether you get either general or personal financial advice from an advisor. This will depend on what you need.
General financial advice doesn’t account for your personal situation or goals, or how it might affect you personally.
Personal financial advice is tailored to your unique-to-you financial situation and goals and is designed to be in your best interests. Such personalised advice can include:
- Scaled advice or “single-issue” advice— allows you to access cost-effective financial advice specific to what’s most important to you right now. For instance, you might just wish to get advice on how much you should contribute to super, or what to do with an inherited property.
- Comprehensive financial advice— is tailored to your particular circumstances and objectives. Your advisor will help you to develop a plan to secure your financial future.
- Ongoing advice— is essential as life doesn’t stand still for anyone. As personal or financial events change your world, the best way to stay up to date is to consult your financial advisor by way of regular monitoring and review of your financial plan and affairs.
3. Find a financial advisor.
It may seem to be an obvious consideration. However, this is a really important step in the process. There are a few options open to you for finding a licensed financial advisor, such as through:
- A financial advice professional association, for instance – the FPA (Financial Planning Association of Australia)
- Your lender or financial institution
- A search on the ASIC (Australian Securities and Investment Commission) website’s Financial Advisors Register
- Recommendations from people you know and whose opinions you respect and trust.
Researching your potential financial advisor is highly recommended. One of the first things to check is their FSG (Financial Services Guide). Their FSG will show:
- The services they offer
- How they charge
- Who owns the practice
- Any links to product providers
- Their AFS (Australian Financial Services) licence number.
4. Meet your potential financial advisor.
Financial advisors don’t usually charge you for the first meeting. This presents a good opportunity for you to determine if they’re a “good fit” for you.
When you first meet with them, ask them about:
- Their qualifications, main client type base and specialty areas
- Their experience, e.g., the length of time that they have been practising as a financial advisor
- Their fee structure
- What information you’ll receive and how often
- How they’ll consult you on decisions
- How they’ll monitor and manage your investments
- What commissions or incentives they receive from financial products and how they’ll choose products to recommend to you. Remember, this aspect of their fees should also be disclosed in their FSG.
A good advisor will get to know you, keep you informed, and help you achieve your goals. They’ll also discuss how much risk you’re comfortable with.
5. Assess your compatibility with them.
Your potential advisor might tick all the boxes regarding their experience, qualifications, fees and so on. Yet, if you can’t establish a rapport with them, the relationship is likely to fail. Ask yourself the following:
- Do they give you immediate straight answers to questions that you put to them, or do they appear to avoid giving a direct answer when faced with a pointed question?
- Do their values and principles appear to be aligned with your own?
- Is their manner professional but friendly?
- Do they listen to you attentively or is it that they appear to more concerned with telling you how good they are?
- If you are meeting with them as a couple, do they give full attention to receiving feedback from both of you?
- Finally, do you like them and feel comfortable in their presence?
Your final choice of financial advisor will be integral to achieving your financial/lifestyle goals. Choose carefully.
The Australian Securities and Investment Commission (ASIC) Rules and Regulations and in particular, REGULATORY GUIDE 175 (RG175) is one that all investors should be aware of.
RG175 is for persons who provide financial product advice to retail clients, and their professional advisors. It considers how certain conduct and disclosure obligations in Pt 7.7 and Div 2 of Pt 7.7A of the Corporations Act apply to the provision of financial product advice.
In summary, this Regulation states that an advisor must always consider the client’s relevant circumstances, that is, the objectives, financial situation and needs of a client that would reasonably be considered relevant to the subject matter of advice sought by the client.