Questions to ask before you appoint a financial advisor
Questions? Meeting a Financial Planner for the first time is a bit like going out on a blind date. You might be a bit nervous. You might not know what to say, or what to ask.
So we at Wealth2You have prepared a list of questions you can take on that vital first visit. Knowing the right questions to ask will help you decide if you are both a good fit. If you arrive prepared to ask the right questions it sets the right atmosphere and assures the financial planner that you are serious, well informed, and looking for the right person to advise you.
The following information is copied from the ASIC (Australian Securities & Investment Commission) website. All links shown in the text will take you to their page where you can review their advice.
Questions to Ask
The information below is supplied by ASIC. If you have any questions about what to expect when seeking or hiring a financial advisor, please visit the ASIC website before your meeting, and again afterwards if you need to check any answers you are given.
Choosing your adviser is an important decision. Do some research and talk with a few advisers if necessary before you decide which one to work with.
Here are some questions to ask:
- Financial qualifications and experience
- Client’s needs
- Financial advice fees
- Financial products and sales incentives
- What to look for in financial advice
Q: What are your qualifications? How long did it take you to get them?
Tip: The adviser should tell you about the subjects they’ve studied and the length of any courses they’ve done. A diploma, advanced diploma or degree qualification in finance, economics, accounting or financial planning in desirable. As a general guide, the longer a course of study the more comprehensive the course content. You can check the adviser’s qualifications on ASIC’s financial advisers register.
Q: What is your representative number and who holds your AFS licence?
Tip: Keep a record of the name and number the adviser gives you so you can check it on ASIC’s financial advisers register.
Q: Are you authorised to provide advice on the products you are recommending to me?
Tip: Use ASIC’s financial advisers register to check the kinds of products the adviser can recommend.
Q: Can you advise on my current products?
Tip: It’s important for you to determine if the adviser is restricted to only giving advice about products on their approved product list. For example, can they give advice in relation to your current super fund or managed fund?
Q: What is your experience as a financial adviser?
Tip: Make sure the adviser tells you about their typical clients. This will help you judge whether they have the experience to deal with people with similar issues and goals as you. For example, are the adviser’s other clients planning for retirement or are they young families wanting to save for their children’s education? Details about an adviser’s experience is also available on ASIC’s financial advisers register.
Q: Are you a member of any industry associations and / or professional bodies?
Tip: ASIC’s financial advisers register will tell you which associations or professional bodies the adviser belongs to. If the adviser is a member, ask them what their association(s) expects them to do to remain a member. You can also check the industry association or professional body’s website for information about the adviser.
See choosing a financial adviser for more information on qualifications and experience.
Q: How do you keep up to date with changes that might affect your clients?
Tip: The adviser should tell you that they regularly attend courses or seminars run by industry associations, professional bodies, universities or registered training organisations.
Q: How do you get to know a new client?
Tip: The adviser should talk about how they’ll get a full picture of your circumstances and needs. They should explain that they need to ask questions about your current situation as well as your financial goals, both long term and short term.
Q: How do you deal with a client who has a few different financial objectives?
Tip: An adviser should help their clients prioritise their financial goals, explain and discuss their choices and develop a strategy to achieve their goals. They should also help a client refine their goals if they are not realistic and achievable.
Q: If I accept this advice, who do I speak to if I have any questions or concerns about my investments?
Tip: You should be able to contact your adviser if you have any questions or concerns about your investments. If the adviser won’t meet with you or return your calls, you can complain. See problems with a financial adviser for more information.
Q: How are my investments monitored, and what information will I receive?
Tip: If you’ve agreed to ongoing advice, you should receive regular reports about your investments as well as regular reviews with the adviser. Check to see what other updates you’ll get, and when you can expect to receive them.
Don’t be afraid to contact your adviser if you have any questions between reviews. Be aware that the adviser might charge you extra for services that are not part of the ongoing advice agreement that you have entered into.
Financial advice fees
Q: How are you paid? How much is your advice likely to cost? Can you give me a breakdown of the costs?
Tip: The adviser should outline what will be included in the fees you pay and whether there will be any additional costs for preparing a statement of advice (SOA), implementing the advice, or revisiting the advice in future years if your circumstances change.
Q: If I agree to ongoing advice, what will I get for my fees? Are the fees paid annually or monthly? Can I get the fee schedule?
Tip: Fees for ongoing advice usually include regular reviews of your circumstances and investment portfolio, and a re-balancing of your investment portfolio if necessary. You should expect to have reasonable access to your adviser when you need questions answered or want to discuss a financial issue with them.
Q: What do I do if I’ve been paying ongoing advice fees but haven’t received an ongoing service?
Tip: ASIC has found some advisers charging for ongoing advice that they have not provided. If you are paying ongoing advice fees, make sure you are getting the services you paid for. If you have paid fees for services you haven’t received, lodge a complaint through the bank or licensee’s internal dispute resolution system as you may be entitled to a refund and compensation.
Q: How can I stop paying your ongoing advice fees if I decide I no longer want advice from you? Are there any penalties or notice periods I need to be aware of?
Tip: You can stop paying for ongoing advice at any time.
Q: Are there any other fees or charges such as service or administration fees that you haven’t told me about?
Tip: Ask the adviser for information about the total amount you’re paying in fees, and who’s receiving each fee. Make sure the cost is given to you in dollars, not just a percentage of the amount you have to invest.
Q: Do you get paid for selling me a product? Do you get any other benefits such as gifts or bonuses?
Tip: An adviser may get ‘soft dollar’ benefits such as gifts or freebies for selling you a product. Ask them to explain what these are and their value. It’s in your best interest to know if there are any incentives for the adviser to sell you a financial product.
Q: If I dispute the fees, what process do you have in place to address my concerns?
Tip: The adviser should explain how their internal dispute resolution system works. The adviser’s financial services guide will also tell you how to lodge a complaint.
See financial advice costs for more information about paying for advice.
Financial products and sales incentives
Q: Do you only advise on in-house products? If so, how do you make sure another product is not a better option for me?
Tip: If an adviser recommends you switch to an in-house product, you should be satisfied that they’ve compared the fees, charges and benefits of each product. The reasons for choosing one product over another should be documented in your SOA.
Q: What fees or other benefits do you receive for referring me to another person or business?
Tip: Be aware that an adviser may benefit from a pre-existing relationship they have with the other professionals or businesses they recommend.
Q: Are you, or this financial advice business, associated with the people or businesses you’re referring me to?
Tip: Check ASIC’s financial advisers register to see the business names associated with the adviser or the licensee they work for.
See financial products and sales incentives for more information about benefits financial advisers might receive.
What to look for in financial advice
Q: What are the risks of this investment in the short or long term?
Tip: The adviser, and the product disclosure statement for each product they recommend, should clearly explain the risks of the investment.
Q: How will any financial losses be covered if the investment doesn’t generate the expected returns?
Tip: All investments carry some risk. The SOA you receive should clearly set out the pros and cons of acting on the advice and how the product aligns with your risk profile. Ask your adviser to explain anything you don’t understand.
See risk and return for more information about investment risk.
Q: How is this investment consistent with my goals?
Tip: The adviser and the SOA you receive should clearly explain how the features of the product(s) will help you achieve your goals. Don’t be afraid to ask for an explanation as many times as you need to until you understand and feel comfortable with the risks.
Q: If I change into the investment you recommend, what will I lose?
Tip: If the advice is to switch products, has the adviser clearly explained what benefits you might lose as a result? For example, consolidating super might save fees but your level of insurance cover might decrease. Make sure you understand the pros and cons of any advice you receive.
See what to look for in financial advice for more information about what you should consider before you act on an adviser’s recommendations.
Ask our questions of several financial advisers. Then use our tips to compare how they rate in experience, professionalism, cost and willingness to put your interests first. Then you’ll be able to choose the right adviser for you.