What to look for in a financial adviser

07 May 2013

By Tim Breen

"I never hear from my financial adviser."

"I do, but I don't know why, I pay them so much, it all seems to go on fees."

"I saw one once, he put me into an investment, which I think pays him some kind of ongoing fee and I've never heard from him since."

Is that your experience?

I am pleased the financial planning industry is undergoing some welcome and much needed change.

It can take up to 5 years of university study and subsequent practice to be qualified as a lawyer. Only then can they advise a client on conveyance on their house.

If the trust account is out only a few cents, a lawyer can face being disbarred. It is a highly qualified profession based on fiduciary relationships where strict rules and qualifications must be upheld.

To be a doctor takes around 7 years of study and training, a chartered accountant 6 years.

Currently, there is no constraint on an individual calling themselves a financial planner irrespective of their training, competence, or even licensing. It may still be possible, for a person to do a crash course online and, about a month later, call themselves a financial planner. All of sudden they are an expert, 'advising' on people's life savings for well over $500,000.

Here are the facts on what you should do, what to look for in a financial adviser and whether you really need one:

  • A highly qualified and skilled financial adviser WILL add significant value to your situation if possible
  • Any adviser who takes a product commission from an investment is hopelessly conflicted
  • The adviser must act in your best interests. Their default position – as opposed to being told - should be a fiduciary obligation to you. Full stop. End of story.

Don't be afraid to ask

  • About their qualifications and experience. If they aren't a Certified Financial PlannerTM practitioner, then why not? You wouldn't accept a junior doctor performing knee surgery on you so why would you accept anything less than the most qualified & experienced for trusting them with your private financial affairs?
  • If they are aligned to an institution for example, to an insurance company or a bank?
  • Is it product selling first and foremost? Or is it about you, your needs and addressing those needs by providing fee for service, strategic advice?

What will you do?

Contact a fee for service, non aligned, Certified Financial PlannerTM practitioner. If they can't genuinely add value to your situation then they should tell you. If they are able to add value, it can be a very beneficial and meaningful relationship for both parties and most importantly, help you achieve your financial and lifestyle goals.

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