financial advice

Picking the good to bad in financial advice

Media coverage over the last 18 months has shown us that not all financial advice is equal. Here's how to pick a good one.

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It’s no secret the financial advice sector has come under heavy scrutiny in recent years, leaving many people sceptical about the value and reliability of financial planners.

While the actions of some bad apples within the industry has had a negative impact on the broader reputation of advisers, it has been an important catalyst for ensuring the profession addresses key issues around education standards, ethics guidelines and trust.

But good financial advice can help you achieve your money goals throughout the different stages in your life – from starting out when you land your first job to growing your nest egg to achieve the retirement you want.

So the big question is, how do you pick a financial planner that cares more about you than just selling product?

You should engage with a planner who wants to be your money coach. You can do this directly or you may even have the option of accessing an adviser through your superannuation fund. Regardless of how you come to find a financial planner, make sure you do your due diligence by answering these questions.

Who’s credible and who’s not?

The first thing you need to check is if the adviser has the appropriate qualifications, not only to ensure you receive top-quality advice but to give you peace of mind and confidence that they have the experience and knowledge to best guide you and your money.

You should ask them if they have a professional membership, such as with the Financial Planning Association of Australia, which also sets the ethical guidelines for the industry. It’s also worth asking what sort of training and education they have – while a short course may have once been enough to give you a title of ‘financial adviser’, many people now recognise the Certified

Financial Planner (CFP) qualification to be the highest standard.

How will you be charged?

If you’re accessing advice directly, checking with the adviser about what their fee structure is will make sure you aren’t hit with any surprise costs.

A flat dollar fee for service is the most appropriate fee structure in the advice service space as you will always know what you’re paying and it will remain the same, unlike fees for a percentage of portfolio or assets under management which costs will continue to grow.

An important question to ask is what the fee covers. Does it include ongoing communication, coaching, or review of your roadmap? How many coaching sessions per year are you entitled to?

What is the level of service for the costs? You should qualify your expectations up front to ensure there aren’t any surprises.

Are you compatible and do you trust them?

The most important thing to consider when deciding on a financial planner is whether you feel comfortable with the person providing the advice and whether you can build trust with them.

It’s important to be able to have personal, open and honest conversations with them as they will become your financial trainer. A good adviser will form a bond with clients, much the same as a good hairdresser does. It’s important to feel comfortable with your adviser as they will help you obtain honesty around money!

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