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Choosing a Financial Advisor: What You Need to Know

November 14, 2018
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6 mins


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How to choose a financial advisor

The right type of financial advice can be priceless.

Choosing a financial advisor can help you to secure a stable financial future, lead to an impressive investment portfolio or even help you break into the market for the first time.

But in contrast, failing to find the right financial advisor for your needs can be extremely costly.

With more and more people claiming to operate as expert financial advisors, it’s becoming increasingly difficult to determine just where to find sound financial advice. In fact, since November 2009, Australia has experienced a 41 percent increase in the number of operational financial advisors.

It has never been more important to choose your financial advisor wisely.

What steps to take when choosing a financial advisor?

To take the guessing work out of choosing the right one, Inovayt Wealth’s Senior Financial Advisor Melbourne, Tony Stewart has compiled his top tips to keep in mind when making your selection:

Check the Financial Advisers Register

When looking for a financial advisor in Australia, it’s important to consider the credentials they hold. Here are some of the commonly recognized qualifications in the industry:

  1. Financial Planner: This is a term that can be used by anyone providing financial planning services.
  2. Certified Financial Planner (CFP): This is a globally recognized certification that demonstrates the advisor’s comprehensive knowledge and experience in financial planning.
  3. Financial Adviser (FA): This title is granted by the Financial Planning Association of Australia (FPA) to advisors who meet the FPA’s professional standards.
  4. Financial Services Representative (FSR): This title is granted by the Australian Securities and Investments Commission (ASIC) to individuals who hold a valid Australian Financial Services (AFS) license and meet ASIC’s training and competency requirements.

Please keep in mind that having a professional qualification does not guarantee the quality of the advisor’s services. It’s also important to verify that the advisor is registered with ASIC and adheres to relevant laws and regulations.

With past behaviour so often the key indicator towards future performance, the government’s Financial Advisers Register is the perfect place to start your research. Taking the time to do this search will make sure you don’t end up taking advice from just anyone– it’s imperative that your financial advisor is the real deal.

Simply perform a search for your financial advisor on the Australia Securities and Investment Commission (ASIC) Financial Advisers Register. The database provides you with each adviser’s qualifications, experience, and employment history and will even tell you whether the adviser has been the subject of disciplinary action by ASIC.

Avoid the bank’s financial advisors

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is the topic on everyone’s lips at the moment. This Royal Commission has uncovered serious conflicts of interest in the financial advice industry which has led to poor advice.

The majority of the issues identified have been with financial advisors employed by the top four banks. The conflict of Interest occurs as these financial advisors are strongly encouraged by their employers to recommend their bank’s superannuation, insurance, and investment products. The end outcome Is that the bank makes money from the financial advice given as well as from the Investment products recommended, however, the Royal Commission has shown that this advice Is sometimes not In the best Interests of the client.

If you’re looking for a financial advisor who will offer impartial advice which is best suited to your individual financial needs, look for an expert who isn’t linked to a bank.

Make a face-to-face appointment

Trusting Google as your consultant or a phone call is a risk that’s not worth taking when it comes to the weighty decision of choosing the right advisor.

Selecting an expert to help you grow and protect your wealth is an investment in a major decision – and whether you get your choice right or wrong will have a long-lasting impact on your future financial state.

Keep in mind that a quality financial advisor will listen to your goals, instead of lecturing you on their own recommendations.

Scheduling the time to meet with a prospective financial advisor will provide you with immediate clarity on whether the partnership is a perfect match, as well as enough time to discuss your finances in detail to achieve the best outcome from the partnership.

You may wish to consider talking to a couple of different financial advisers to compare and contrast their approach, knowledge and fee structure. Most financial advisors will provide a free Initial Consultation.

What is the experience of the financial advisor?

Consider the advisor’s experience and track record, especially in areas that are relevant to your financial goals.

What services does the financial advisor offer?

Make sure the advisor provides the services that you need, such as retirement planning, investment advice, or tax planning.

What are the upfront and ongoing fees a financial advisor charges?

When it comes to the fees charged by financial advisors, there is a variety of fee structures to consider. Here are some of the most common ones:

  1. Hourly rate: The advisor charges a fee based on the amount of time they spend working on your financial matter.
  2. Flat fee: The advisor charges a one-time fee for a specific service, such as preparing a financial plan.
  3. Commission-based: The advisor earns a commission from the sale of financial products, such as insurance or investment products.
  4. Asset-based fee: The advisor charges a fee based on a percentage of the assets under management, which is typically an ongoing fee.

We recommend that you discuss the fee structure with the advisor before engaging their services. It’s also important to ask about any additional fees for specific services, such as tax planning or estate planning.

Our aim is to provide you with all the information you need to make an informed decision. By comparing fees between different advisors, you can find one that fits your budget and meets your financial needs.

Ask about the advisor’s fees and make sure they are transparent and reasonable.

How can you confirm the reputation of the financial advisor?

Confirming the reputation of a financial advisor is an important step in making an informed decision. Here are some recommended methods:

  1. Verify qualifications: Look for professional certifications, such as Certified Financial Planner (CFP) or Financial Adviser (FA). You can verify the advisor’s credentials by visiting the relevant professional organizations’ websites.
  2. Check registration: Financial advisors in Australia must be registered with the Australian Securities and Investments Commission (ASIC). You can verify the advisor’s registration by using ASIC’s Professional Register.
  3. Read reviews and ratings: Look for feedback from past clients on websites such as LinkedIn, Google, or other financial planning forums.
  4. Investigate disciplinary action: Check if the advisor has faced any disciplinary action by the relevant professional organizations or ASIC. This information can be found on ASIC’s disciplinary action register.
  5. Seek referrals: Ask friends, family, or colleagues for recommendations and if they have had positive experiences with their financial advisor.

We believe that following these steps will provide you with a better understanding of the advisor’s reputation and help you determine if they are a good fit for your financial needs.

What can a financial advisor help me with

Our financial advisors at Inovayt Wealth specialise in superannuation, retirement, personal insurance, investment advice, and budget and finance structures and are available to meet with you in person to discuss your options.

Should you require more information or clarity on any of these topics, please an Inovayt Financial Advisor today.

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