How to choose a Financial Planner who will work in your best interests…

If you haven’t been living under a rock lately, you would have heard of a major event going on in Australia, called the Royal Commission.  It’s an investigation into the way the banks and the financial planning industry have been behaving and it’s hasn’t been good reading.

It reminds me of my wife’s favorite show ( and no I’m not a closet fan), “The Bold and the Beautiful”. It’s got major corporations ripping people off, charging fees for clients that are dead, charging fees for no advice, selling their own product to increase the amount they make from their clients whether it is in their best interest or not.

You’ve got the drama with one celebrity adviser with major awards proven to have self-interest at heart along giving bad conflicted advice.  Their’s someone collapsing while giving evidence.  There are executives either resigning because they know the heat is on and they did the wrong thing or they are being sacked.  You even now have the banks looking at exiting the financial planning business because they don’t know how to run financial planning businesses.

It’s got all the hallmarks of a great drama series, the only thing missing is everyone sleeping with everyone.

As a consumer, you must be sitting there just wondering what the hell is going on.  You don’t know who to trust anymore and if you did need advice, how do you know they are acting in my best interest and not just looking to take as much of money as they can whether this is in my best interests or not.

The fact of the matter is this stuff has been going on for years, ever since I started a tad over 20yrs ago in this industry.  I think I have just about seen it all, even to the extent as a part owner of financial planning firm a number of years under a large bank and seeing this pressure at board level.  As much as they say it’s all about the client, in their eyes it all about the client as long as it is our product.  This is clearly coming to light now, but I think a little too late.

But, it’s not just the big banks, it’s also businesses that are licensed through the big banks as well and sometimes as a consumer it is had to tell.  I’m currently helping a new client make a claim against a previous adviser for bad advice at present, it should never happen, however, this adviser was not qualified to give advice in the space that he did and now the client suffers because of it.

I know this may seem like a little bit of a rant, however, I have always acted in my clients best interest, whether I have benefited from it or not, and believe me this did not go down well in the last business I was part of.

It reminds me a little of a perfect illustration of two types of advisers that exist put together by Hightower in the US who summed it up perfectly.  They use this great animation to explain the difference between a butcher and a dietician.  You can view the video by CLICKING HERE.  It’s a couple of minutes but it’s worth a watch.

They talk about when you go into a butcher, they are only going to sell you meat as that is all they have to offer.  Very much like walking into a bank, they are only going to promote what they or own, same goes for some financial planning businesses that are licensed by the banks.  However, if you go to see a dietician they are going take all these tests and work out a program that’s right for you and tells you exactly what you should be eating, not just meat.

Now, you may be sitting here thinking that you will never use an adviser after all this.  Here’s the thing everyone can benefit from advice, even the local Warren Buffett can benefit.  You just need to ask the right questions.

Here are some questions you can ask when seeing an adviser for the first time.

Who are you licensed through?

A large proportion of financial planning firms are licensed through a large bank.  This will give you some sense of what they have to offer, and if they are licensed through one of the banks there’s a likelihood they would favor the banks’ products over any other.

What products are they able to advise or recommend?

This one can be a tough one because there are so many products in the marketplace, however, they should have enough variety and options that aren’t limited to just the bank products if connected with a bank.  It becomes expensive to cover every single product in the marketplace and what most good financial planning businesses do is narrow down to the best ones that are going to suit their clients.

 Are they recommending an investment portfolio they receive income from?

This is a big one for me.  What a lot of businesses have done over the last few years is started to build their own investment products where they are able to receive revenue as well.  This was brought out in the Royal Commission.  A business that had their own license had set up their own Self Managed Super Fund (SMSF) administration service along with their own investment service.  When advising this particular client, they were recommending their own SMSF administration service ( they make money on), recommended their own investment service (they make money on) combined with the adviser fees.  To be honest this is no different than what the banks were doing.  So, even some well know financial planners were starting to look a little like the banks.

In this case, the client didn’t want an SMSF and to be honest could have got a similar result retaining their own fund.

If they are connected with a bank, and recommending their own product, ask them what they receive by recommending that product and would they receive the same by recommending something different.

You want to hear that they receive no extra or are not remunerated any differently.  The Royal Commission highlighted where a client received advice from a bank aligned adviser, 68% of the time an in-house product was recommended.

Are you fee for service or do you charge a percentage of the assets you manage on my behalf?

It’s my view that in this day and age, all fees should be a fee for service.  I can’t tell you the number of arguments I have had with advisers about their interests being tied to the clients.  Their argument, if the markets go up we benefit you and when the markets go down we suffer to therefore our interests are aligned.  I honestly don’t buy this argument.  How can you base your fee on events you literally have no control over, does not make sense to me.  This will also encourage the adviser to perhaps not recommend the right way to handle your money as they will be remunerated more if they look after more of your money.

I moved to fixed fees some time ago based on the work involved and complexity.

How is the advice going to put me in a better position?

An adviser should be able to answer this one for you.  It’s part of one of the requirements as a financial planner, the advice must put the client in a better position than what they were prior to coming to see you.

One other point I would add, that when seeing an adviser for the first time, you want to walk out of the first meeting thinking the adviser really understood what we wanted in the years ahead with a real roadmap of what you are looking to achieve.  In some cases if done right, you will talk through things perhaps that has not come up before, nevertheless, you should get the feeling the adviser is trying to really understand you.

If you spend most of the meeting discussing investments and products, they are most probably not the right adviser for you.  Don’t get me wrong having the right investments is important, however, there are far more important points that need to be covered for you to achieve your goals than just investments.  They are one part of this picture.

In our first meetings with a new client we spend the majority of the time working on what they want their future to look like, the life they are looking to achieve or the outcomes.  We move onto what’s getting in the way and discuss where they are now.  Once this information is at hand we can start building their roadmap and action plan.  Rarely do we discuss much about investments and products.  That generally comes at a later stage.

Anyway, I hope that has given you some insight into the questions to ask, as at some point in time it’s likely you will need to engage the services of a financial planner.  Make sure you ask the right questions.

If you have any thoughts, questions or experiences you would like to share I would love to hear from you.  Please email me at

If you feel someone would benefit from the information contained in this blog, do them a favor and feel free to send it on.

Make it a Great Life!

Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth

Mob: 0401 253 729

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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 date of publication. This is an online information blog. It does not imply an offering of securities.

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