I think it’s fair to say the financial services industry has taken a battering to say the least over the last two years.
Largely driven by the Royal Commission into the practices of the financial services industry.
You may have been following closely what has transpired over the last 2 yrs and been shocked at what’s been uncovered.
One thing for sure is, it’s holding people back from seeking financial advice, advice that will take them from where they are today to where they want to go much quicker, safer and with less stress and anxiety.
Recently ASIC (Australian Security and Investment Commission) conducted a survey of consumers to gauge their views around different aspects of seeking financial advice. You can view the report here>>
I want to take some parts of the survey results and expand on them further while providing a framework to assess whether a financial planner is right for you and how to choose the right one.
Firstly seeking financial advice is and can be a big step. After all, you need to bare all, detailing all your finances in front of a complete stranger.
Sometimes this can be overwhelming and quite intimidating at the same time.
But, here’s the thing, it shouldn’t be that way. It should be a positive experience as your talking about your future here. It’s a time to let go of the past, learn from any mistakes and start making positive steps towards your future.
I know with many of our initial client meetings they are very conversational (our clients say it’s more like having a conversation and that’s what they like), discussing what they want and why it’s important to achieve certain things.
Consumers are looking for advice…
Given a large amount of negativity towards advisers and the industry as a whole, there was an overwhelming need for advice.
“41% of Australians intended to get advice in the future”
“25% of Australians intended getting advice in the next 12mths”
In order of priority, the top areas people wanted advice on were investments, retirement income planning & growing they’re super.
A massive 79% of people said that Financial Advisers have expertise in areas I do not have.
75% said they can introduce me to financial products they would not normally find on their own.
While 73% said they can introduce me to good ideas they may not have thought of.
Being financially educated was really important with 69% indicating being educated around financial matters were important to them.
In seeking financial advice, while expertise & reputation were important it was the soft skills of the adviser that was the second most important factors.
Talking in a way that you can understand, taking the time to understand their needs and goals while also being someone they feel comfortable talking too.
Something that we pride ourselves on and as our clients would say, it feels more like a conversation when they come in and it’s what they enjoy about working with us.
While the report showed consumers needed advice and they could benefit from the advice in many different ways then what’s holding people back?
What Do Consumers Think About The Financial Advisers?
The biggest concern or comment about the financial services industry is that it can seem opaque.
It’s a service that’s intangible, in reality you can’t see it and the only physical thing you receive is a big fat document with a lot of mumbo jumbo it in.
So, it’s no surprise consumers think this way.
“49% said Financial Advisers are more interested in making themselves rich”
I tend to think this comes from past experiences with financial advisers and the past focus on selling products rather than advice.
The Royal Commission certainly showed some practices where it was quite evident that this was true. The adviser would receive fees for the advice, then recommend a product they also received a fee from and then recommended an investment product they also received a fee for.
I’ve got to say this is blatant profiteering, not to mention the conflict of interest issues involved. This person, thank goodness left the industry.
The old way of charging for advice may be a factor as well. Where an adviser may charge a % fee based on the level of assets/investments they manage.
In my view, this way of charging is a little bit bemusing. They are charging based on factors they have no control over. They can’t control what the market does so why charge that way.
This could lead to a conflict in their advice. There is an incentive for the adviser to retain as much of the investments as possible.
“37% said they did not have their best interests at heart”
Showing that some advisers may be failing in their duty to provide advice in the best interests of their client.
I have seen this many times over and it makes me angry every time I see it.
From moving products to substantiate a fee when no change was necessary to using their own products driven by profiteering.
So, it’s no wonder consumers are skeptical.
While these concerns were reported, it was also reported those that had recently received advice were more positive towards advisers.
It may be that these concerns are perceived rather than from real experiences.
So we know people are looking for advice, really needing advice but are very hesitant to engage.
So, if you are looking for advice, how do you go about finding yourself a good one?
#1 Check out Adviser Ratings or the FPA who has a list of advisers in your local area you can check out.
Not all advisers will be on Adviser Ratings as they need to pay to be on that site but you will find reviews on the advisers.
The FPA will list advisers that hold industry qualifications.
#2 Expertise in the area you’re looking for advice in.
Not all advisers are all the same. Some are generalists and provide advice across all advice needs from young families to those planning retirement.
While some might be a specialist in running Self-Managed Super Funds.
We happen to specialist in those up to 10 yrs from retirement, predominately planning on being self-funded, helping them plan their retirement and smooth transition into retirement. Our focus is helping our clients live the best life with the financial resources they have.
We provide the framework and systems to make it a reality with less stress and anxiety.
#3 Who are they licensed through?
At some stage, there will likely be products recommended. Who the adviser is licensed through will give you a general idea what type of products they will be recommending.
Ask the adviser who they are licensed through.
For instance, I am licensed through a private licence, Exelsuper Pty Ltd, meaning we are not owned or connected to one of the large banks where a large percentage of advisers are licensed through. Albeit this is starting to change.
#4 Limitation of products.
Ask the adviser, are they limited in the products they are able to advise on. In most cases, who they are licensed through will dictate what type of products they are able to recommend. This could be an indicator that they do not have access to a wide variety of products.
Most advisers will have access to what’s called an Approved Product List. Essentially a list of pre-approved products the adviser can recommend to a client.
We have what we call a pre-approved product process. Not limited to certain products. For instance, if there is a product we believe more appropriate for our clients then we are able to run it through this process to gain approval.
Having said that we are continually looking for the best of breed products to assist our clients to achieve financial success.
#5 Does the adviser or their business receive any financial benefit from the products they recommend?
This question will identify any potential conflicts that may be present.
If the adviser of business receives an added benefit from the product they are recommending, it’s time to assess whether the conflict is influencing their recommendations.
For instance, we do not receive any other benefit from any product we recommend. We charge our fee for our service and that’s it. It doesn’t matter the product, as long as it is suitable for the client and helps achieve their end outcome.
#6 How are you paying for the service?
If you are seeking advice there is going to be a fee involved. Most advisers will charge an upfront fee and an ongoing fee.
Some will charge a fee based on the level of assets you have to invest. This fee will change as the portfolio moves up and down.
Personally, this type of fee arrangement makes no sense to me at all. How can someone charge based on factors they have little to no control over.
The adviser may say, our interests are aligned with your interests.
The portfolio goes up we both benefit and if the portfolio goes down we share in the downside with you.
Let me get this one straight, no one can predict investment markets, there’s also a high probability your adviser can’t beat the market so why charge based on this? Makes no sense.
Fee for service. Where the adviser charges a fixed fee based on the services provided. This is my preferred way to charge. It’s based purely on what service we provide to our clients.
At the end of the day, we are there to get our clients from where they are today, to where they want to be without the complexity (it doesn’t have to be complex), safely and on time.
# 7 Do I feel the adviser is listening to me?
Probably the most important outside the adviser’s experience I find clients are looking for.
As an adviser, while our main role is figuring out the financial stuff for our clients, however, more often than not we’re having in-depth discussions about what matters most.
Stuff that may be going on in their lives…do I help the family out…what if I bring my trips forward…sudden health issues…how do I manage the transition into retirement?
You need to feel comfortable talking to your adviser, you’re going to be with them for a long time.
#8 Arrange a meeting with them first.
Most advisers will provide a no-obligation first appointment so you can get to know them and see whether they will be a good fit for you.
Given that our expertise is in retirement planning we offer a Confident Retirement Call. We spend 30 mins over the phone discussing the retirement you are aiming for. We help you cut through all the noise, provide some guidance on areas that require focus to get a feel for what life would be like with us. We do this all at our cost and you get a short report details your personalised game plan. If there happens to be a great fit, we’d let you know and we’d progress to more in-depth discussions about how that is going to work.
You can book your Confident Retirement Call here>>
Have any questions, feel free to email me at email@example.com
Don’t feel Overwhelmed anymore…
Make it a Great Retirement!
Challenging the Status Quo!
Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth
Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at June 2018. This is an online information blog. It does not imply an offering of securities.