How to Choose?

Choosing a financial planner can be difficult. It is one of the most important decisions you will make. If you choose the wrong one it may cost you tens of thousands whereas if you choose the right one, the result will be the opposite.

As a starting point you need to do some research.

This could include:

  • Asking friends and family who they use
  • Asking other professionals such as accountants or lawyers for a recommendation
  • Doing an internet search for planners in your area

When you have found a potential choice for your new financial planner, you should consider checking the following:

  • That they are on the adviser register
  • Their qualifications and experience
  • That they can advise on your current products
  • That they are a member of an industry association


What to look for when you meet with a financial planner

A good financial planner should ask about your personal circumstances and help to identify your goals. After the first meeting, you should be confident that the financial planner understands your situation, needs and goals and you should be clear about the service you are receiving, what the advice will and won’t cover, and how much it will cost.

  • A good financial planner will generally have the following characteristics:
  • Passionate about what they do
  • Proactive and interested in ongoing continuing education
  • Technologically literate
  • Well regarded within the local community

Questions to Ask.

Your first meeting is an opportunity to ask any questions you may have about the adviser or their services. Below are some important questions to consider asking the financial planner during the first meeting:

  • Who owns the firm?
  • What services do they offer?
  • What is their main type of client?
  • What are their qualifications?
  • What initial and ongoing services do they provide?
  • What are the costs?
  • What is their approach to investing?

It also important to seek clarification on any concepts discussed that you did not fully understand. A good financial planner should be happy to explain and discuss financial concepts to you until they are confident that you understand them.

Things to consider

Make sure you have been provided with, and have read through the Financial Services Guide (FSG) before agreeing to formally proceed with a relationship with a financial planner. It is important that you carefully read the Financial Services Guide (FSG) provided to you. The Financial Services Guide is a document that planners must provide to all new or prospective clients. It sets out the following important information:

  • How they charge fees for their services
  • How to make a complaint
  • Who owns the business
  • What limits exist, of any, on the provision of advice
  • How they get paid, including any commissions
  • Any interests, associations or relationships which could influence the advice they provide

Make sure you feel comfortable with the financial planner. Generally, the relationship with your financial planner will continue over the long term. It is important that you choose someone that you can get along with, understand and trust. It is important than you feel that you can be honest with your adviser and be comfortable sharing details about your personal financial situation with them.


Obligations of a Financial Planner

Licensing through dealer groups

Every Financial Planner in Australia is licensed through what is known as a dealer group. The dealer group then assumes responsibility for the conduct of their authorized representatives, generally known as financial planners. In the event that a financial planner has behaved illegally or not acted in the best interests of a client it is possible for the dealer group to be held responsible for the conduct of their authorised representatives.

The Australian Securities and Investment Commission is responsible for monitoring financial planners to ensure that they comply with the law. Where there is evidence for non compliance ASIC will investigate and if necessary prosecute a financial adviser.


Future of Financial Advice Legislation

Following the Global Financial Crisis and a string of financial scandals involving financial planners the Federal Government implemented a number of changes to the industry which will hopefully act as a safeguard for the community going forward.

The FOFA reforms provide the following:

A prospective ban (ie after 01/07/2013) on conflicted remuneration structures including commissions, in relation to the distribution of and advice on retail investment products including managed investments, superannuation and margin loans.

The introduction of a statutory fiduciary duty so that financial advisers must act in the best interests of their clients, subject to a ‘reasonable steps’ qualification, and to place the best interests of their clients, ahead of their own when providing personal advice to retail clients. Whilst this may seem self explanatory to most people it wasn’t always the case.

Increasing transparency and flexibility of payments for financial advice by introducing a two-yearly opt-in arrangement ensuring that consumers are more engaged with their financial advice services and annual fee disclosure statements will provide consumers with transparency about the ongoing fees they pay. I simple terms this means that as a consumer you can turn off the fees at any time if you are not satisfied with the level or service. In the past many of the older investment products continued to pay the adviser a fee as long as you held that investment.

Percentage-based fees (known as assets under management fees) will only be charged on ungeared products or investment amounts and only if this is agreed to by the client.


The Code of Ethics

The Code of Ethics aims to provide general guidelines on how financial planners need to behave. This code of ethics is as follows:

Client First – Place the client’s interests first

Integrity – Provide professional services with integrity

Objectivity – Provide professional service objectively

Fairness – Be fair and reasonable in all professional relationships, disclose and manage conflicts of interest

Professionalism – Act in a manner that demonstrates exemplary professional conduct

Competence – Maintain the abilities, skills and knowledge necessary to provide professional services competently

Confidentiality – Protect the confidentiality of all client information

Diligence – Provide professional services diligently


Rules of Professional Conduct

The rules of Professional Conduct are specific standards of a mandatory and enforceable nature. Each rule applies to all members of the Financial Planning Association of Australia.

The rules of professional conduct are enforced by the Financial Planning Association of Australia. For further information on the rules of practice you can visit the FPA website

There is a second professional body the Association of Financial Advisers (AFA) which has a similar code of conduct and disciplinary process. For further information see their website


What Can Go Wrong?

Financial planners are in a unique position in that they generally have access to all of your personal financial information and have your trust. Unfortunately a small number of financial planners breach this trust and do not act in your best interests.

We have set out below several things to look out for that you should be suspicious of when dealing with a financial adviser:

  • If someone tells you markets always go up do not believe them
  • Make cheques payable to the company named in the prospectus or product disclosure statement
  • Make sure all the paperwork and receipts from your investments are sent to you
  • Never sign blank withdrawal forms in advance
  • Only invest when you have seen a prospectus or product disclosure statement and understand what you are investing in
  • Check what you are being charged for the initial advice and ongoing fees. If these appear higher than you would ordinarily expect seek a second opinion
  • Borrowing to invest is not for everyone as it magnifies your gains but also magnifies your losses
  • Do not be seduced by offers of free coffee, food, internet access and lavish client functions. At the end of the day you as the client will be paying for it in any event.

Just because the corporate regulator has not acted don’t assume that the business model and operations are safe. ASIC is often the one that is left to clean up the mess after the horse has bolted such as what occurred with cases such as Storm Financial, Opes Prime and Lift Capital.


Ending a Relationship with an Adviser

If you make the wrong decision when choosing a financial adviser, you can always change your financial planner and it generally will not cost you anything. All that is generally required is to sign a change of adviser form, which will transfer the investments including all the fees that are being paid from your old adviser to the new adviser.

However, 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.


Further Information

For further information on how to choose a financial planner you can refer to the following resources:


ASIC MoneySmart – Choosing a Financial Adviser

ASIC MoneySmart Financial Advice and You booklet