Show me the money! How to choose a financial adviser

Financial expert, psychologist, friend. Financial advisers can wear many hats and selecting the right one can make all the difference to your wealth, but how do you find the right one for you? Once upon a time, you might have walked into your local bank branch and they would have referred you on to someone – in the post FoFA and banking reform world, the internet is a more likely starting point – but it’s not the only step. Here’s what you need to know to select the right financial adviser for you.

Knowing when you need financial advice

People decide to get advice for a range of reasons – sometimes it could be triggered by a change in financial circumstances, such as an inheritance; for others, it could be a lack of time to do it themselves or a need for support with complex situations.

It’s worth noting that financial advice doesn’t have to be long-term – you might have a temporary situation you need short-term help on, such as insurance, but the type of relationship you need and want will dictate who you work with.

“I think if I could change one thing, it would be this notion that advice has to be end to end. It doesn’t. It’s like getting married before a first date. We have to be ok that advisers can provide services on a separable basis.”

Charlie Viola, Pitcher Partners Sydney Wealth Management

Your financial goals v your financial adviser’s specialties

Part of the role of a financial adviser is to help you set your financial goals and a strategy to meet these, but it’s a good starting point to know what you would like to achieve. For example, are you trying to pay off a mortgage? Trying to generate an investment income stream to supplement your working income? Need to save for education? Or about to retire?

Different financial advisers often have different specialties which can govern whether they are the right person for you to talk to – for example, if your focus is having an adviser run your portfolio of individual shares, selecting one that specialises in overarching strategy rather than stock selection would be a poor decision.

“Specialisation becomes a differentiator because it allows us to go deeper into each individual, their needs, and it also positions us well to adapt to our clients' changing advice needs over time. Personally, I specialise with High Net Worth clients and more complex needs, such as SMSF, tax structuring and more bespoke investing.”

James McFall, Yield Financial Planning

Financial advisers and financial advice firms will typically have a Financial Services Guide (FSG) that covers their services, fee structure, if they are owned by a company, any product providers they are linked to and their Australian Financial Services License (AFSL).

Some advisers offer a first session free where you only pay if you decide to proceed with their advice.

Check the license

Listeners of the Liar, Liar podcast know that checking the Australian Financial Services License (AFSL) and checking the license belongs to the person you are hiring is crucial.

You can start by checking the Financial Services Register on the MoneySmart website. If you’ve been given a license number, check the name matches the person you are speaking to. You can also use the register to find an adviser near you if you don’t know who you want to speak to.

In order to give you personal advice, financial advisers can either hold their own AFS license, or be an authorised representative of a company holding an AFS license.

You can also check if your financial adviser has been banned or disqualified from giving advice by searching on ASIC.

Human or robo?

Roboadvice is becoming increasingly popular and is a lower service tier of financial advice. It is automated financial advice generated by computer algorithms covering your finances and your goals.

How it typically works is recommending a pre-packaged investment portfolio based on your answers to a simple questionnaire – for example, it might direct you to a high growth portfolio if you have a longer investment timeframe and are comfortable with a higher level of risk in your investments. To offer reduced costs, many of the portfolios use a blend of exchange traded funds (ETFs) to offer broad market exposure at a lower cost.

It is generally a lower cost way of accessing financial advice because it is a more restricted offering. It is best suited to simple financial situations and goals rather than those which may be more complex or have sensitivities. For example, it wouldn’t be suitable for those using a trust structure for their investments.

It can be a way of dipping the toes in the water for those who are not really for the complete advice package.

Financial advice from a human by contrast allows for nuance in advice – and even within this, some financial advisers may offer different tiers of service which vary based on frequency of meetings, how frequently a portfolio might be rebalanced, the strategy, the types of investments used.

Other wires about roboadvice:

The art of financial advice - Damien Klassen | Livewire (livewiremarkets.com)

Is robo-advice the future of financial planning in Australia? - ETF Securities Australia | Livewire (livewiremarkets.com)

Preparing for the first date – a checklist for your financial adviser

There’s some things you’ll need to bring along for your first meeting with a financial adviser and depending on the state of your finances, this might take a bit of time to pull together.

Your financial adviser needs a complete understanding of all your assets and debts, your income, expenses, any insurance policies you hold, if you have a will or power of attorney and details of lawyers and accountants (if you have them).

Five questions to ask the first time you meet a financial adviser are:

1. What is and isn’t included in advice (referred to as ‘the scope of the advice’)
2. Fee structure and how to pay
3. How often you’ll meet to review your strategy and progress and the level of information you’ll receive
4. What level of access they have to your investments
5. When they will consult you for permission to act on your investments

A matching of minds and personality

This shouldn’t come as a surprise, but it is important that you like and get on with your financial adviser – after all, you will be trusting this person with not only your money but some of your most personal information. For example, you might need to tell your financial adviser about your health to select insurance cover or to plan for changes in mobility. Or you might need to discuss what you want to happen to your wealth after you die – will the kids inherit? Or the local dog shelter?

“Financial planning is not just about understanding the numbers, but really getting to know a client, understanding who they are as a person and what’s important to them – after all, we are all very different.”

Nicola Beswick, FMD Financial

If you can’t discuss personal matters with your financial adviser, it is less likely that their advice will really cover your circumstances and needs.

It’s ok to have a ‘first date’ with an adviser to decide if you are compatible – and it’s also ok to change advisers down the track if the relationship isn’t working for a range of reasons. This isn’t a one-sided decision either, many financial advisers equally are concerned with selecting clients they believe they can work well with or they have the right specialisation to help.

You’ve found the right financial adviser for you, what happens now?

Generally, you’ll receive a proposal of advice and fees from the financial adviser. If you agree to it, then you’ll have another meeting with the financial adviser to get into the details of your finances and situation before you’ll receive a Statement of Advice (SOA). An SOA will outline the strategy your financial adviser recommends, and the costs involved in implementing. You might also have ongoing advice sessions as part of your relationship with your financial adviser depending on what you’ve agreed together.

Getting started

A visit to the MoneySmart website for a list of financial advisers near you might be a good starting point. 

Or you can also read about some financial advisers in our series, Meet the adviser.

Frequently asked questions

1. What does a financial adviser do?

A financial adviser helps you with financial advice and management across a range of areas, such as investments, insurance and estate planning.

2. How do I set financial goals?

One way of setting financial goals is to consider what needs and wants you have now and in the future. Next consider what costs might be involved in meeting these needs and wants and what resources you already have available, such as career based income, to achieve these costs. A financial adviser can assist you in setting financial goals and the timeframes and strategy for achieving these by considering your assets, liabilities and income in a holistic way.

3. What is roboadvice?

Roboadvice is online automated financial advice generated by computer algorithms. It typically requires investors to fill out a basic questionnaire in order to make basic recommendations.

4. Where do I find a financial adviser?

There are a few ways to find a financial adviser. Google searches, the MoneySmart website, banks and wealth institutions are one option. You can also consider recommendations from friends and family but ensure you check the license before using recommendations.

5. How do I check an Australian Financial Services License (AFSL)?

You can check if your financial adviser has an AFSL by using the Financial Services Register on MoneySmart. Financial advisers will typically list their AFSL on their Financial Services Guide and website – you can check the AFSL matches on MoneySmart as well.