HOW TO PICK A PROFESSIONAL FINANCIAL PLANNER THAT CREATES WEALTH FOR YOU
Selecting a financial advisor that is working in your interests, rather than their own, comes down to asking the following questions:
Can you provide broad tax planning advice.
Many people would not realise that for a financial planner to provide tax advice they must be registered with the taxation registrations board. If an adviser cannot provide tax advice they are limited to investment advice.
The best way to understand the importance of getting strategic tax planning advice, as part of receiving financial advice, is this advice forms the foundation of achieving financial security, while the choice of investment products is akin to selecting the building products to be erected on the solid foundation.
This means if a financial planner cannot provide this very broad tax planning advice you will more than likely not get the best advice available.
2. Have you always been a fee-for-service adviser.
Any adviser that has not always operated as a fee-for-service adviser, in other words they have earned their money from commissions paid by fund managers and other product providers rather than always having charged a fee, tend to have more of a sales mentality than an advice mentality and should be questioned further.
3. Do you base your advice and ongoing fee on the value of the investments?
There are two types of fee-for-service models. One is based on the amount of work expected to be done, charged at an hourly rate, with the fee being set for stated services upfront.
The second type is where the adviser charges a percentage of the value of the investments they are advising on, either as a set percentage or a tiered percentage. Care must be taken when the fee is a percentage of the value of the investments, as this can result in a fee that is a lot higher than would have been charged if based on the actual time taken for providing the advice.
4. What is your approved product list based on?
Financial advisers must be authorised advisers of an AFSL company. The regulations require that advisers can only provide advice on the approved investment product list issued by their AFSL licensee.
Advisers more interested in finding the best investment for a client, rather than acting as a distribution channel for fund management companies, tend to have approved product lists that are very broad rather than being limited.
One of the broadest approved product lists is based on those issued rating agencies. Two of the more well-known being Lonsec and MorningStar. They rate the majority of retail fund investments available from being investment-grade to highly recommended for worthwhile investments, down to sell the investment or have a negative rating.
This means an adviser whose approved product list is based on investments that have an approved or better investment rating have a very broad selection of investments from which to choose to recommend to clients.
5. Does your advice model require me to sign on for the review service?
There are some financial advisers that can appear to be inexpensive regarding the cost of providing the financial advice, but if they require clients to sign on for a review service as part of receiving the advice, they can prove to be a lot more expensive.
6. Do you require clients to use investment platforms?
Some financial planner requires the client to sign onto an investment platform as a part of providing advice. This can have several disadvantages for clients in the long-term.
These platforms make life easier for the financial planner, from a point of view of providing and administering the ongoing advice, but come at an extra cost to the client. In addition, investment platforms don’t have all investment grade and above managed investments available, and as was shown in question 4, this can result in you not getting access to the best performing funds. If you’re looking for a professional accounting practice that not only looks after all of your tax and small business matters, but also provides strategy-based tax, retirement, and investment advice, contact TaxBiz Australia.
