How To Choose A Top Financial Adviser
Many people don’t consider consulting a financial adviser until they are close to retirement. However, for the best chance for financial independence in your retirement, the earlier you start on your financial plan, the better.
What is a Financial Adviser?
Financial Advisers help you achieve your financial goals. They help you create a financial plan designed to enable you to live the life you want to live. Financial Advisers can help you at any life stage with any financial issues or goals you’ve set, from budgeting to buying a house, managing superannuation, tax planning and wealth management.
However, choosing the right financial adviser is a crucial component of a successful financial strategy. Essential factors such as qualifications, licence, services offered and fees should be considered when looking for a financial planner.
Here are the steps to choosing a top financial adviser:
- Understand what type of financial adviser you need
- Determine what service fits your needs
- Be An Active Participant
- Look for the right qualifications
- Evaluate the fees involved
- Meet & Compare different financial advisers
- Review Carefully
- Know the difference between Accountant vs Financial Adviser
1. Understand what type of financial adviser you need
The term ‘Financial Adviser’ can mean different things, ranging from automated robo-advice to local, personal financial advisers tailored to your circumstances and financial goals.
All of these financial advisers help you manage your money in various ways:
While your financial institution will continue handling your regular transactions such as daily savings, term deposits and personal or housing loans, a financial adviser will provide specialist advice on strategies and products for wealth creation, superannuation saving, retirement and investments such as shares, managed funds and property trusts.
Robo-advice is automated financial advice you can find online. You answer questions online and the computer builds an automated financial plan according to your financial goals and risk tolerance. Robo-advice is a cheaper alternative to hiring a financial adviser and a good option if you have a simple set of circumstances. However, this is not the best method if you have a complicated financial situation, looking for a specific service or need questions answered.
General Financial Advice
This is the next level up from robo-advisers whereby you engage with a financial adviser who can offer general financial advice. It’s important to note that this advice is exactly that, general and does not take into account your circumstances, financial aspirations or how the guidance will affect you directly. This option is excellent for getting a general financial plan put together and gives you the ability to have any general financial questions you might have answered by a human adviser.
Personal Financial Advice
A personal financial adviser is a person who offers customised financial advice based on your circumstances. This type of service is boutique and tailored to your individual needs. It factors in your financial goals, current financial standing, as well as ongoing advice to accommodate changing circumstances. Having your own personal and private financial adviser is often the most expensive option but it’s the right choice if your situation is complicated and requires a specialised service.
2. Determine what service fits your needs
Everyone’s financial circumstances are unique and changing. Determining which service is best comes down to several factors including your life stage, personal wealth and what goals you have set for yourself.
For Example: If you’re approaching retirement, you will need to make decisions about superannuation, or you might need help with succession planning for your business. You may have recently inherited a large sum of money or a compensation payout and are needing advice on investing.
Understanding your situation first is key to determining what type of service is right for you. It’s crucial to spend time on this step as you want to find the right financial specialist who understands your position and can provide you with the best advice.
3. Be An Active Participant
When you’re assessing a Financial Adviser, it’s essential to be active. You can't just show up to an appointment and be a passive participant. It's a relationship you need to own and take the initiative as it’s your financial future. Don’t be afraid to ask questions, share your goals and personal financial circumstances. Like any relationship, the better your communication, the better the results will be and both you and your financial adviser will be able to come up with the right plan that fits your needs and puts you on track to hit your financial goals no matter how big or small.
4. Look for the right qualifications
Some financial advisers are originally qualified in accounting, stockbroking or other fields of finance. Others have undertaken specialised training in investment and retirement planning.
To give advice on securities, such as shares, bonds and managed funds, advisers must either be licensed by the Australian Securities and Investments Commission or be an Authorised Representative of a licensee, who is responsible for their monitoring, training and supervision.
There are many duties and responsibilities imposed on individual advisers by law, policy and industry standards.
It is also vital that the adviser has access to research on investment products and information on issues in the business and legislative environment that may affect investment decisions. These may be built into an ongoing service in which the adviser regularly reviews your investment strategy and portfolio performance.
5. Evaluate the fees involved
The methods of remuneration for financial advisers may vary. Financial advisers do not receive commissions or volume payments but instead charges a fee based on the service you require and agree to. This fee will often cover the preparation of your financial plan and establishment of the recommended investments.
Your adviser should inform you of the fee details before you make your investment decisions. Importantly, you must be satisfied that the planner’s advice gives you the most suitable combination of investments for your needs.
There are several different fee models — some might charge an upfront fee or you may be required to pay a percentage of assets under management.
The Financial Planning Association of Australia (FPA) says the average upfront cost to receive advice is about $2,500, or $3,500 per annum if you have an ongoing relationship with an adviser.
6. Meet & Compare different financial advisers
When deciding on a financial adviser, put together a short-list of at least 3 advisers and carefully review their financial services guide (FSG) which should be on their website and covers their services, what they charge and if they have links to a product provider. If you can’t find a copy of their FSG on their website, then give them a call and they should email it to you right away.
After you’ve read their FSG and have a shortlist of potential advisers, book a face to face meeting to learn more about their services, how they can help you and more about their process. This is also a great time to ask them any questions you may have and learn more about their background.
When comparing different financial advisers, it can be helpful to prepare a list of the same questions to ask each adviser, that way you can gauge each of their responses to better inform your final decision on who to work with.
7. Review Carefully
Even if you have your financial house in order, a financial adviser provides the comfort and peace of mind of a well thought out plan, a plan that leaves you better prepared for the future. What’s more, advice extends beyond measurable financial gains, to improved physical health, stronger relationships and personal happiness.
There’s plenty to consider when trying to secure your financial future. Should I pay off the mortgage or put money into super... but what about renovations? When can I stop work? How do I afford the children’s education?
Useful financial advice answers these questions by mapping out your goals and putting in place the strategy to achieve them. The traditional measures of financial advice success have focused on achieving your tangible goals, such as retiring earlier, relative investment returns, or simply spending less.
While these financial benefits of advice have long been established, can financial advice positively affect the more intangible aspects of our lives? What is the true value of advice?
8. Know the difference between Accountant vs Financial Adviser
Accountants vs Financial Advisers? Which should you choose? This is a common question.
An accountant, unless they are licenced as a financial planner with ASIC, can't give you financial advice or help you manage your wealth. The same works the other way, a financial adviser can't do your tax returns or lodge your BAS statements unless they're registered to do so.
The best financial advisers are on your side, not that of a bank or a 3rd party. They work with your best interests at heart and prepare a financial plan that meets your specific needs, regardless of how complex your situation is.