| There has been much adverse
publicity in the media recently about financial
advisers, following the release of an ASIC report on
advice given by 124 financial advisers to some ASIC
‘mystery shoppers’. This was judged to be poor
advice mostly because the advisers recommended
products from companies with which the advisers had an
affiliation.
To be fair, any client seeking advice from
representatives of banks, building societies,
investment companies and so on would have to be naive
not to realise that they will recommend their own
products.
To obtain the best advice for your particular
situation, you should be fully prepared before meeting
with an adviser.
Firstly, DO YOUR HOMEWORK. Write down your
answers to the following questions: How much to you
want to invest? Do you want a fixed-term investment
with no access to your money, or do you want access to
that money in case of an emergency? What do you want
your investment to achieve, i.e., high returns,
regular cash flow or long term stability? Do you want
an adviser with expertise in a particular area?
If you are a complete novice in the investment
area, you could contact the National Information
Centre on Retirement Investments Inc. (NICRI), (www.nicri.org.au),
a free, independent, confidential service funded by
the Federal Government. NICRI do not give investment
advice, but do provide informative leaflets on a
variety of subjects, for example, unit trusts, fixed
interest investments, shares, rollover, cash
management trusts, how to select a financial adviser,
your first interview with a financial adviser, the
advantages and disadvantages of a wide variety of
investment products, and so on.
Secondly, DRAW UP A SHORTLIST OF ADVISERS.
Obtain recommendations from friends, colleagues and
relatives, and select some in your area from the
Financial Planning Association’s website.
Thirdly, make appointments to see at least three of
those on your list. Before you meet them, research
the companies they work for, and have some questions
prepared about their qualifications, experience,
affiliations and resources. At your appointment, make
notes of their answers.
Be wary if:
The adviser doesn't take time to get to know you,
your needs and expectations before recommending
investments. Your needs should come first, their own
commissions second.
The adviser promises high returns; you should ask
for evidence that the suggested investments have
performed well in the past, and ask to see the
company's projections for the future. A good adviser
should be willing to discuss the potential downsides
of recommended investments.
You ask for short-term projects and the adviser
suggests long-term investments like shares and
property. Again, a good adviser should focus on
investments that meet your particular needs.
The adviser recommends only one company's products.
You should be told prior to any discussion if the
adviser is affiliated with any institution.
The adviser does not offer you a prospectus or
report for any recommended investments. Financial
advisers should explain the level of risk attached to
recommended investments, your rights and
responsibilities, and disclose any fees, charges and
commissions.
Before leaving, you should ask for the names and
contact details of other clients, with similar
financial resources to your own, who could act as
referees for the adviser.
Taking these steps should give you enough
information to make your decision. However, if you do
not feel comfortable with any of these advisers for
any reason, start again – it is essential to find a
adviser you can trust, as your financial future could
be at stake.
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