The revelations from the Financial Services Royal Commission about the unethical behaviour of some large financial planning groups have done immeasurable damage to the entire Financial Advice Industry. As is often the case, there is no publicity given to those in the industry who behave honestly and provide a valuable service.
The reality is that organising your finances during the transition from work to some form of retirement is complicated. Most people need some expert help if they are going to find a good balance from a number of variables including issues like reinvesting your superannuation payout; getting a good return on money invested; minimising tax; applying for a pension; and budgeting. Getting all this right is not easy.
How do you find a financial adviser who will put your best interests first and not sell you the products preferred by the adviser’s employer? Here are some suggestions:
- Be on your guard if a planner wants you to place all of your money in a particular managed fund and is touting big returns. There are risks involved with all investments so a particular level of return is not certain.
- Avoid a planner who does not discuss the need for diversifying your money into different assets with different management. Lack of diversification is a high risk strategy. Putting all your money into one asset or one type of asset can be harmful to your wealth.
- Watch out for the planner who wants you to sell your direct investments such as good quality, dividend paying shares and well-located rent producing real estate and replace them with managed funds, they may be more interested in commissions or funds under management fees than your best interests.
- If you are investing in a managed fund pay the money to a well-known and reputable third-party custodian who is actually holding your funds, not directly to the planner or his or her company.
- Being pressured to invest — don’t be pressured to put your money into an investment that you are not comfortable with, blindly relying on a planner’s recommendations. Find out what you do need advice on by doing your homework first.
- Choose an adviser that has your (not his or her) best interests at heart. Unless you are seeking limited advice, you should try to identify an adviser who offers independent advice on financial matters to clients and can guide you through overall strategies and advise you about investments and suitable financial products from the whole market.
- Before you select a financial adviser, talk to your accountant to see whether he or she knows of a good financial adviser and ask your successful friends if they have used the services of a financial adviser that they can recommend.
- Get a clear understanding on how you financial adviser will be paid.