To be a financial adviser in Australia, an
individual must be a holder of an Australian
Financial Services license or be a representative
of a licensee. If they are neither, I would
suggest you immediately move on. Many
people who have been duped by investment-
scheme promoters have subsequently found
out that the people who recommended they
invest in the scheme were not licensed.
which provides a level of protection in the
event that your adviser breaches the law.
It should be noted that PI insurance does not
cover you in the event your investment
loses money.
You should expect to pay for the advice you
receive. If you are not paying, you should
question why not. Advisory businesses are not
charities, so if you are not paying a fee for the
advice then how are they financially viable?
Often advisers are employed by a product
manufacturer such as a bank, super fund or
insurance company, and their so-called `free'
service is funded by the management fees
their employer charges its funds. So, guess
whose product you will end up getting?
out and find the most expensive firm, but
my word of caution is to be careful trying
to save a few bucks in advisory fees, as this
could cost you 10 times that amount in the
long term through poor advice or dismal
investment returns.
this meeting when you should ask for an
estimate of upfront and ongoing advice fees.
Remember, if the adviser says there aren't
any costs, question their suitability.
and who is the licensee
As mentioned above, you want to be
careful of the adviser being influenced in
their product selection due to the business
owner, their employer. While many of the
large licensees are now owned by banks or
insurance companies, you should be asking
what products they have available to use
are they restricted to the products of the
employer? The licensee will generally have an
Approved Products List (APL) or guidelines
on what the adviser can offer.
Many licensees require their advisers to
operate off an Approved Products List.
This list typically includes products the
licensee has looked into and is comfortable
with the adviser recommending. You should
be asking if the products and, importantly,
platforms on the list are purely that of the
parent company. It is not uncommon for the
list to include a range of different companies'
products, yet the platforms are purely that of
the parent. I would stay away from these, as
platform choice can be an integral aspect of a
well-structured investment plan.
its security and/or performance. This was seen
with some devastating consequence during
the global financial crisis, when some of the
products on APLs exploded and left investors
with little or nothing. In saying that, I would
be using products on an APL where possible,
as you should expect at least some level of
scrutiny for them to make it on the list.
and accreditation
Apart from being licensed, ensure that the
adviser you are speaking to has appropriate
experience (I would suggest a minimum of five
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