The Basis of Good Financial Advice

Making the correct decision on how to invest and look after your money is very important.

Unfortunately the complexity of Australia’s financial system means most people need some guidance along the way, not always but usually a financial planner or accountant can help.

As financial planners we help clients to understand their financial situation and to develop a financial plan that will help them meet their goals and objectives.  We take into consideration almost everything that will have an impact.  In addition to a financial planner’s formal qualifications, holding worldly experience enables solutions to be created by your financial planner with confidence.

The reality is the right financial planner will provide outstanding value for money, well beyond the cost of the advice received.  WealthSpan is one of a handful of financial planning firms who measures and tracks the value our advice generates.  To date WealthSpan’s clients have received value averaging approximately 20 times what they have paid in professional fees.  We would be happy to share some of their stories and strategies with you.

While money is important, value often goes beyond dollars and cents.

Through the financial planning process a professional financial planner helps clients gain peace of mind and the security that comes with being well informed and in control.

Often a planner can help by providing support for clients wanting a clear financial direction.

An industry with a poor reputation

People masquerading as ‘financial advisers’ are often featured in the media or more recently the Government’s Royal Commission into Banking. Unfortunately, the reputation of the whole financial planning industry is damaged as a result.  How do you avoid being caught up in a scam?

Here is a checklist of what to do and what to look out for when you’re seeking financial advice.  In over 28 years of being in the advice industry, no more than a handful of clients have ever asked one of these questions, let alone all of them.

  • What are your qualifications. You can verify them here at ASIC’s Financial Advisers Register.
  • May I speak with a couple of clients who have engaged you and have known you for more than two years?
  • Please explain to me how your professional indemnity insurance works and may I have a copy of the current schedule?
  • What areas are you not able to advise me on?
  • Please explain to me any conflicts of interest you have.
  • Please explain to me any associations you have with a product manufacturer – no matter how insignificant you think they may be.
  • May I have a copy of your Financial Services Guide to read?
  • Do you ever recommend industry superannuation funds?

You should also take a look at ASIC’s MoneySmart website for other great tips.

One of life’s most valuable lessons

WealthSpan has many legal professionals as clients.  As you might imagine, lawyers have a good eye for detail and are usually good at asking the right questions.  Like the rest of us, they are very busy and struggle to find the time to read through all the paperwork financial planner’s are required by law to provide.

After presenting a Barrister with our 50-page advice document including everything he could possibly ever need to know about my advice, he asked me for one more thing.

Client:  Paul, before I go ahead with your recommendations I would like you to do one thing for me.

Sure I replied, What is it?

Client: Take this piece of paper and in a few sentences, in non technical speak, just tell me why, what your recommending is better for me than what I’m doing now.

When asked would this simply not repeat what was already in the report he said:  To have you write it down, in my presence and in your own handwriting provides me with more peace of mind than your compliant Statement of Advice.

The message here is simply – no matter who you are, or what you know, never feel too proud to ask for things to be explained in plain english.

Cutting through the conflicts

As you have already gathered, there are financial planners and then there are financial planners.  It’s our view at WealthSpan that a financial planner should receive financial reward for providing financial advice, not for selling a financial product. The advice must only be in the client’s best interest and to ensure this happens, conflicts of interest should not exist.

Conflicts of interest can arise when:

  • Advisers are paid a percentage fee based on how much you invest, borrow or pay in premiums.
  • Advisers have a financially beneficial link to a product manufacturer.
  • Advisers receive bonuses based on the volume of particular products they sell.

Unfortunately many financial planners in Australia are exposed to the above conflicts and now you know which final three questions to ask.

Financial planning and financial advice is truly valuable for people of any age and of every net wealth position.  There is no excuse for any person to be sold a product they don’t need or to loose their hard earned wealth from shoddy advice, but unfortunately it happens.  The best protection against this risk is to know what questions to ask.  Hopefully you now have a solid list.