Why get advice?
The right kind of financial advice can really make a big difference. It can help you:
Set your financial goals and achieve them
make the most of your money
get any government assistance you’re entitled to
Feel more in control of your finances and your life and avoid expensive mistakes,
protect your assets.
Financial advice can give you confidence that your future plans are achievable.
If you’re not on track to achieving your goals, financial advice can help you put the right strategies in place, or come up with more realistic goals.
Where to start
You may have avoided getting financial advice because you’re not sure how a financial adviser can help you. You may also think you’ll have to pay for a comprehensive and expensive financial plan. Depending on the kind of advice you need, you may not.
Instead of financial advice, you may simply:
want factual information about different financial products and strategies
need to understand more about financial services generally.
There is a lot of information online that can help you with questions about your finances:;
ASIC’s MoneySmart website – moneysmart.gov.au
Australian Securities Exchange’s online courses and education website – asx.com.au
your super fund
Association of Financial Advisers financial columns and blogs.
Banks credit unions or building societies
Bank, credit union and building society staff can be a good source of free factual information about ways to save such as savings accounts, term deposits, and first home saver accounts. This might be all the information you need if your main financial goal is saving for a home or building a savings buffer.
Remember to shop around and compare products.
Your super fund
Your super fund can provide factual information, including:
investment options within your current fund
saving for retirement
how to make extra contributions to your current fund
consolidating multiple super funds
insurance options within your current fund.
The Department of Human Services’ Financial Information Service offers free money seminars all over Australia. Topics include:
managing your money
reducing your mortgage
investing understanding superannuation.
Information Service officers can also give you information over the phone or at a face-to-face interview.
Visit humanservices.gov.au or call 132 300 for more information.
You can get general advice about financial products or investing from someone who works under an Australian Financial Services Licence (AFSL). General advice does not take into account your particular circumstances, such as your objectives, financial situation, and needs. For example, you may receive general advice when you attend a seminar about investing.
Financial services from an accountant
Accountants can give you information on specific tax situations and setting up a Self Managed Super Fund (SMSF). However, only licensed advisers can advise on investment strategies.
If you want a recommendation that takes your personal situation into account, you need personal financial advice.
For this kind of advice, it’s important that you only talk to someone working under an Australian Financial Services License (AFSL).
Types of personal advice
Personal advice can range from simple advice on one topic to a comprehensive financial plan. Some examples of personal advice are:
Simple, once-off advice on one issue – This addresses a particular aspect of your finances (for example, the best way to contribute to your super).
Broader financial advice – This involves a comprehensive financial plan to help you set goals and covers investments, superannuation, insurance and retirement planning.
Ongoing advice – This involves regular reviews with a financial planner that reassesses your goals, financial position, strategy, and investments.
Different ways to get information or advice
Factual information or advice on simple topics can be given by phone, online advice services or email, while complex advice is usually better suited to a face-to-face meeting or video conferencing.
Internet options such as Skype also allow people in rural and remote areas to access advice.
The cost of the advice will depend on upon the scope and kind of advice you receive.
Choosing an adviser
Before you contact an adviser think about the kind of advice you want, and what you’d like to achieve from the advice. This will make your initial discussions more useful and help you find an adviser who suits your needs.
Step 1: List a few ‘possibles’
Professional associations usually have ‘find an adviser’ services that will help you find a member in your area. They also have a code of conduct for members to follow and a list of suspended or terminated members.
Visit moneysmart.gov.au for a list of professional associations you can contact.
You could also ask your friends or family to recommend a professional adviser they’ve used.
Step 2: Get their financial services guide
Once you have a few possible advisers, get a copy of their financial services guide (FSG) by visiting their website or by phoning and asking them to send it to you. The FSG will say what services they offer, how they charge and whether they receive any additional payments or benefits.
The FSG will also tell you who owns the company the adviser works for and if they have links to product providers. Many advisers are linked to banks, fund managers, and life insurance companies. This can affect the services and products offered.
Step 3: Check they are licensed
Only consider advisers who hold an Australian Financial Services Licence (AFSL) and/or are employed by or authorised to represent a business that holds an AFSL. You can double check the adviser or licensee’s name on ASIC Connect’s Professional Registers connectonline.asic.gov.au. Advisers who are ‘employee representatives’ will not appear on the register as their employer holds the AFSL.
Step 4: Check for qualifications and experience
Make sure an adviser’s license covers the services you are looking for.
You should also call and check if the adviser has the right experience and qualifications for your needs. During the conversation, make sure the adviser focuses on the services and strategies they can offer you, rather than the products they can sell you.
If the adviser says they can’t give you any information about their services unless you have a meeting or provide all your personal details, don’t feel pressured to do so.
Step 5: Check they can advise on your current products
You should check that the adviser can provide advice on your current financial products. This is critical when it comes to super, as the adviser may not be able to give advice about your current fund if it is not on their ‘approved product list’.
Be careful of advisers who only sell one investment product or solution.
Step 6: Check the fees
Ask the adviser for an estimate of the cost of the advice. Even a rough estimate will give you an idea of what you’ll be paying.
Before the first meeting
Before you meet the adviser for the first time, do some preparation. Good advice depends on a clear picture of your financial situation.
For example, for retirement advice, you could start by listing:
what you own – your home, savings, super, car, shares, and other investments
what you owe – debts, including mortgages, loans, and outstanding credit card balances
income and expenses
what insurance you have and for how much.
At the first meeting
Your adviser will need to collect detailed information about you. This is so they can work out your needs and objectives.
Give your adviser accurate information. If you are not honest with your adviser or leave things out, you could get advice that’s wrong for your situation.
The adviser will need to know your financial needs and objectives. For example, do you want:
a strategy to pay off your mortgage sooner?
a plan that covers all aspects of your finances?
to build wealth and save for retirement?
ongoing advice about investments?
advice on consolidating super accounts?
You need to be clear about which issues will be covered, and which ones won’t be.
Once you have established the scope of the advice, the adviser will be able to give you an idea of the cost.
Know your risk tolerance
A good adviser will work with you to help identify the most suitable strategy to achieve your financial goals.
Part of this strategy should be to protect your capital and get reasonable returns, without exposing you to too much risk. Higher potential returns usually come with higher risks. Never agree to an investment product or strategy that you’re not comfortable with or don’t understand.
Your attitude to risk can change with time and circumstances. If you’ve agreed to ongoing advice, you need to tell your adviser if your ability or willingness to take on more or less investment risk changes.
At the end of the meeting, your adviser will go away, 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 product they recommend – these describe the features of the products.
Do not sign or agree to anything until you have read and are happy with these documents.
What to look for in a good statement of advice
Paying for advice
The first meeting
The first meeting with an adviser is usually free. During this meeting, you and the adviser can discuss your advice needs and the adviser can give you an idea of what they can do to help you.
The adviser will also be able to tell you how much the advice will cost so you can decide whether to proceed any further. Make sure the cost is given to you in dollars, not just a percentage of the amount you have to invest.
Statement of advice fee
The adviser will prepare a statement of advice (SOA) that will formally document the advice, the strategies and any financial products they recommend. The cost for preparing the SOA will be billed to you or may be deducted, with your permission, from the balance of your investment.
The cost of the advice will depend on its scope. As a guide, expect to pay between $200 and $700 for simple advice and between $2000 and $4000 for more comprehensive advice. If you’ve agreed to ongoing advice, some of the cost may be paid over time.
If you receive advice about insurance, you may not have to pay for the SOA. This is because the adviser will be paid commissions from the insurance company.
Even if you decide not to proceed with the recommendations in the SOA, you will generally be expected to pay for the preparation of the SOA.
Fee for implementing the advice
If you decide to accept the adviser’s recommendations there may be a fee for implementing the advice. This pays for administration work.
You may be able to negotiate the rate with your adviser.
There are usually different options for how you pay. You can agree to pay upfront or the cost can be deducted from the investment.
Ongoing advice fee
If you’ve agreed to pay a fee for ongoing advice, it’s important to understand what your fee will cover. Services may include:
regular reports on your investment portfolio
an annual review with your financial adviser
invitations to seminars.
Many advice businesses have ‘bronze’, ‘silver’, ‘gold’ or ‘platinum’ services you can choose from, with fees scaled according to the services you receive or the amount of contact you can have with your adviser.
Advisers can charge another implementation fee in addition to your ongoing advice fee if you want to change your finances following a review.
If you’ve agreed to ongoing advice, you will receive an annual fee disclosure statement that will outline the fees you paid, the services you received, and the services you were entitled to receive for the previous 12 months.
Carefully consider the information in your fee disclosure statement:
Have you benefited from the services you paid for?
Were they worth the cost?
Are you happy to pay the ongoing advice fee for another 12 months?
You can end your ongoing advice relationship with your adviser at any time.
Commissions and volume-based payments for recommending financial products can influence the advice given by financial advisers.
Commissions are banned on new investment and super products from 1 July 2013. Some other commissions, for example for selling life insurance, will remain.
However, if you bought a financial product before 1 July 2013 the adviser may continue to receive a commission each year for advising on that product. The commissions will continue to be deducted from the money you have invested until you leave that product or end your relationship with that adviser.
Information about commissions may not be included in your fee disclosure statement.
Find out about the fees you’re paying
If you’re unsure about the fees you’re paying, talk to your adviser. Ask them to explain the products you have investments in and whether they pay commissions.
If commissions are being deducted from your investment and you’re not happy with this arrangement, speak to your adviser about your options. You may be able to switch to a product that doesn’t pay commissions or arrange for the commissions to be rebated to you.
How to complain
If you’re unhappy with any aspect of the advice or service you receive, try to talk it over with the adviser. If you are still not satisfied (or your adviser won’t meet with you) you should make a complaint through the adviser’s internal dispute resolution system. The adviser’s financial services guide will tell you how to do this. You can also complain to the adviser’s professional association.
You should receive an acknowledgment letter from the adviser’s internal dispute resolution system within 14 days. They have 45 days to give you a final response. If you’re unhappy with the response, you can contact an external dispute resolution scheme. The business must tell you which scheme it belongs to or you can call ASIC’s Infoline on 1300 300 630.
Ending your relationship with an adviser
If you decide to end your relationship with an adviser, there are some things you should consider first.
Some financial products 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 adviser.
The implications of this may include:
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.
Australian Financial Services Licence (AFSL)
A license is given by ASIC that allows people or companies to legally carry on a financial services business, including selling, advising or dealing in financial products. You should only deal with licensed businesses as you are better protected if things go wrong and you will have access to free dispute resolution services. A license does not mean that ASIC endorses the company, financial product or advice or that you cannot incur a loss from the investment. ASIC grants a license if a business shows it can meet basic standards such as training, compliance, insurance and dispute resolution. The business is responsible for maintaining these standards.
A fee paid to an adviser or salesperson as a result of selling a particular product. An upfront commission is based on the sale amount of the product. An ongoing commission is based on the balance of the account.
Financial services guide (FSG)
A guide that contains information about your financial adviser and the AFSL holder. It should explain the financial service offered, the fees charged and how the person or company providing the service will deal with complaints.
Product disclosure statement (PDS)
A document that contains information about a financial product’s key features, fees, benefits, and risks. A financial adviser must give you the PDS when they recommend that product to you.
Self-managed super fund (SMSF)
A private super fund you can manage yourself. SMSFs are regulated by the Australian Taxation Office and can have one to four members. All members must be trustees to ensure they are fully involved in the decision-making of the fund.
Statement of advice (SOA)
A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, and information on any payments or benefits the adviser or licensee will receive.
Reference : www.moneysmart.gov.au
This may contain general advice. General advice is prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on the general advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs and if the advice relates to the acquisition of a particular financial product for which a Product Disclosure Statement (PDS) is available, you should obtain the PDS relating to the particular product and consider it before making any decision whether to acquire the product.