As a home finance manager with Westpac, David St Pierre convinced cash-strapped older Australians to borrow against their homes to invest in a property development scheme.
But instead of providing returns of up to 20 percent as the homeowners were promised, the scheme went bust and the money they had borrowed was lost.
Meanwhile, Roan Financial Group adviser Darren Tindall encouraged clients to switch superannuation providers and insurers to companies with better offers.
But the comparisons he provided of the super funds were misleading, and he failed to tell the insurers of his clients’ pre-existing medical conditions, likely rendering the policies useless.
The Australian Securities and Investments Commission (ASIC) revealed last week that it had taken action against both men; Tindall was banned for providing financial services for five year and St Pierre was sentenced to three years in prison.
But how can a consumer guarantee that they’re choosing an honest financial adviser, when even those who chose one from a household-name bank weren’t safe from worry over their finances? (Westpac made good their losses when St Pierre’s actions came to light.)
Starts at 60 asked the experts at ASIC and in the financial planning industry what consumers need to know when seeking advice, and for their top tips on picking the right wealth guru for you.
What you’re likely to pay for a consultation
ASIC’s MoneySmart website, which has many financial tools to help with tasks such as budgeting and planning for retirement, has a broad guide on the potential costs of financial advice.
MoneySmart says that simple advice, such as asking about a specific financial matter or having your super fund reviewed, usually costs between $200 and $500 for an online consultation and between $500 and $1,500 for a personal meeting.
More detailed advice on multiple areas of your finances or on a specialist topic such as aged care can cost between $1,500 and $5,000, depending on the complexity of the issue.
The industry average for ongoing advice, such as conducting regular reviews of your financial plan or longer-term investment management, is $1,700 a year, according to the site.
Fees can include investment management fees, insurance commissions, audit fees and administration fees, depending on the types of investment you hold.
“You should always ask your adviser to explain how the advice will add value over and above the fees charged,” MoneySmart says.
What you should check before setting up a meeting
MoneySmart advises asking friends, family and colleagues, or another adviser such as your family lawyer or accountant, to recommend a trusted adviser. You can also look for local advisers through industry associations such as the Financial Planning Association and the Association of Financial Advisers.
Once you’ve found an adviser, check ASIC’s register of financial adviser for information on the adviser’s experience and qualifications, and to make sure they haven’t ever been banned or disqualified from providing financial services.
Louise Lakomy, a certified financial planner (CFP) and director at Crystal Wealth Partners, says new customers should ask for a copy of an adviser’s Financial Services Guide before attending the meeting. The guide provides information such as the type of services the adviser provides, any conflicts of interest they may have and what dispute resolution processes they offer.
“Depending on the skills and expertise of the planner, they may be limited in what advice they can provide,” Lakomy explains. “Consumers should be aware of these restrictions to ensure they receive the appropriate level of advice.”
Andrew Bolingbroke, a CFP at Boutique Advisors, agrees that it’s important to ensure the advisory firm you choose has the expertise you require, whether it be on aged care or estate planning, and to decide whether there’s benefits to you in having a central point of contact for all your financial needs or whether you’d prefer multiple advisers within a firm or at different firms.
What you should know before you go
Once you’ve booked your appointment, pull together some documents and information that’ll help you get the most out of your time with the adviser. This info could include a log of your assets and borrowings, your income and expenses, what insurance you hold and a copy of your will.
What to ask your new adviser
Michelle Tate-Lovery, a CFP and director at United Financial Services, advises asking your financial advisor’s philosophy, to get a feel for whether you and the advisor are a good match.
“You want to ensure you’ll be a client for life and that you build a long-term, trusted relationship and that your financial planner has a proven track record,” she says. “At every significant chapter in your life that has financial consequences, you want to feel confident that your financial planner can guide you in the right direction.”
She says it’s also important to be clear with your adviser on where you are in a financial sense and where you’d like to be in the future, so the adviser has a good understanding of your expectations.
Finally, Craig Mather, a CFP at Portfolio Planning Solutions, recommends thinking about the questions your adviser is asking you.
“You should feel the conversation is all about you,” he says. “If the financial planner is primarily talking about themselves, telling you how great their firm is, how many qualifications they have, how they have the best investment strategy, I’d be wary.”