The 12 month long Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry gained a lot of attention into the shortcomings of the Australian financial services sector. We discuss some common myths and the effects on everyday Aussies.
A good financial adviser is only about the returns they can get me?
False – Financial advice is a journey towards your goals and the strategy need to achieve these. Returns at or above the benchmark is part of their role, but it should be more about the strategic advice they can provide.
Financial Advice is only for the wealthy?
False – There is a common miss conception that an adviser’s sole focus is on investments and if you don’t have wealth then you won’t find value in seeking out a good adviser.
The focus should not be on the specific returns, all other aspects of advice are pivotal to long term achievement of financial goals, this could include tax minimisation, debt reduction, wealth protection or cash flow management strategies.
What is financial advice at its core?
Firstly it is strategy, then it’s about what sort of investments and products you might need to help that strategy flow out.
Does the royal commission bring change to everyday Aussies?
Yes, which will be seen is the following areas.
- There will be more invested time in you as the consumer, which will lead to a change in the client experience (a focus on your financial goals and how to achieve theses).
- A heavy compliance burden may lead to an increase in the cost of financial advice.
- There should now be a focus on advising (strategy), not on the selling of products.
What constitutes poor advice?
- Clients being put in a position where they are taking more risk than they need to achieve their financial objectives.
- Not tell it as it is. A good adviser needs to have the confronting conversation and provide the reality check if the client’s aspirations are unachievable.
- An adviser thinking they can do better than someone else in managing people’s money when it comes to investment returns. Just accept reasonable returns for the risk you are comfortable in taking.
Top questions to ask your adviser to gauge if you can trust their advice?
- Ethics – ask about the way in which they conduct advice. What is the advice process?
- If I only require strategy advice can I get this from you? (scoping out the investment advice)
- How are they remunerated? For only placing investments? Is there any conflicts of interest?
- What is their experience and qualifications?
- Ask what type of advice can and cannot the adviser provide? Have they got limited scope and does this align with what you are seeking from your adviser.
- What does the cost structure look like? And make a comparison to others in the market.
- Number one question is, can I pay you to do nothing? Because sometimes ‘do nothing’ can be the right advice if your existing strategies are appropriate. This can really shows your adviser is putting your best interest before their own.
- Your adviser is there to help you make smarter decision around what you do with your money.
- They are also there to give you clarity on where you are heading. After you have defined where you are now and where you want to be in the future, the adviser’s role is to fill that gap with strategies.
- And be your accountability partner to help you take action.
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.