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Top 8 facts about financial advice

Australians want advice about their finances, but are uncertain about trusting others in making decisions. The paradox was revealed in RaboDirect’s National Saving and Debt Barometer survey, which found that almost 60 per cent of those uncomfortable with their finances say they find financial planning daunting, but only 30 per cent of consumers say they trust advice from financial planners and advisors.

While the government aims to improve confidence in the financial planning industry through its Future of Financial Advice (FOFA) reforms, which are mandatory from July 1, it still pays to consider carefully when choosing a financial planner. Get smart with your financial advice by following these tips.

Shop around

Many advisors will not charge a fee for an initial meeting. Use this to your advantage and meet with several advisors before deciding to proceed. Ask also for a recommendation from friends and family.

Check their qualifications

Ensure the advisor is appropriately licensed and that they are permitted to advise on the services you are seeking.

Check qualifications via ASIC’s Professional Registers.

Background search

Thoroughly research the advisor through online searches, including undertaking a general search of the ASIC website, a Google search and on social media such as Twitter or LinkedIn for background information.

Understand your risk profile

Are you a younger saver keen on using leveraging to maximise returns, or a retiree or mature-aged worker more concerned with maintaining savings?

It’s important to understand your own risk appetite. If you find an advisor pushing you to take a higher risk position then it might be a sign they are not the right advisor.

Ask for referrals

Ask the advisor for referrals from existing clients. Make sure you contact at least a couple to get different opinions on the advisor.

Understand the fees

Make sure you fully understand the advisor’s fee structure and familiarise yourself with industry standards and regulations regarding remuneration.

Use information freely available from ASIC and from industry bodies, such as the Financial Planning Association of Australia (FPA) and the Association of Financial Advisers

Study the strategy

Take the time to understand the advisor’s strategy and products before proceeding. If you do not understand it, question your advisor until you do, and if it still does not make sense, perhaps reconsider.

Maintain an interest

Once you have made your decision, keep an active interest in your portfolio and regularly monitor its performance.

If it is not performing in line with your expectations, get the advisor to explain why in language and concepts that you understand. Don’t be afraid to check what you are being told by your advisor against other sources.

Remember that the majority of advisors are great at what they do and will act in the best interests of their clients. It is, however, important you do your own due diligence and partner with an advisor you trust and who understands your risk profile and financial goals.

About the author: Bede Cronin is RaboDirect’s National Manager for Key Account Service, he has over 12 years corporate banking and financial services experience; working for financial organisations including Macquarie and CommBank. In his role with RaboDirect, he is responsible for building the profile of Key Account Services and managing new business relationships

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