So, you’re off to see a financial planner. Typically, you should be asking all the right questions such as how they operate, what experience do they have, what are their qualifications, who owns their firm, the list just goes on and on. However, there are 4 important things that you should know or questions that you should be asking before you go ahead. These may not be the kind of questions that you just come out and ask, and some of them you may want to leave a little bit later after the ice is broken, however they could make a significant difference to the advice you get. Further, the advice you get is going to make a difference to the life you experience, and the future you’re going to have.
- Most financial planners will retire at the same time as you, maybe even later. There is an old saying that plumbers have leaking taps – and it’s lasted this long for a reason. While financial planners are, on average, highly skilled professionals who have trained for many years, who understand finance and investment better than the average person on the street, they are more than likely to be on a very similar path as you are. They won’t have time to do wills, take out adequate insurance, save enough money, keep all their super together or invest properly. Typically, it’s a case of do as I say, rather than as I do. While this may sound a little bit tough, the average age of a financial planner in Australia is 55 at the moment and slowly coming down. Given that this is the average, many are still working in their 60’s and later.
- Everyone has favourites and biases, financial planners are no different. There can be numerous reasons behind a person’s bias – they could be commercial, regulatory, or from ones experiences or expectations. Whatever be the reasons, a person’s bias is going to be reflected in the advice that they give. A lot of financial planners have a bias towards managed funds, some of them prefer shares. A small number of them love property. Some planners will be restricted to certain types of investments (managed funds are the most popular here) because of their license. It’s hard to remain completely unbiased, but as a prospective client of a financial planner, that’s what you’re aiming for. There are numerous ways to find out what biases a financial adviser has, however the easiest way is to just what their favour types of investments are. Other than that, you’ll have to pay attention and see if you can pick it.
- Most financial planners work for banks. While they may not have a sign out the front saying so, most Australian Financial Service Licensees (AFSLs) are owned by major financial groups that produce financial products. While there is nothing wrong with an AFSL being owned by a major financial group, it does create some fundamental, structural direction for the AFSL to operate. How do you know if your financial planner is linked to a bank? It’s as easy as just following the trail of ownership back through the multiple layers that exist. A lot of financial planners operate in a practice that is privately owned, this gives them a certain level of autonomy with regards to pricing, brand and marketing, staff and infrastructure. They will, however, need to be licensed with an AFSL. Many AFSLs have brand names that may not be familiar to you, and many will not give any hint as to their ownership. However, simply searching online for the AFSL and doing some due diligence will give you a lot more information about who you’re dealing with.
- Now this one is going to shock a lot of people, but it’s well worth getting on record. One fact often not associated with financial planners is a rather simple one – they’re all human. While this may not be the image that they want to portray to their clients, it’s a simple and unmistakable fact. As a result of this basic flaw, things such as “human error” are going to creep in from time to time. No one planner is brilliant enough that you can just shut off from your financial responsibilities. Sounds too good to be true? Look into it. If your financial future hangs in the balance on the back of an important transaction, keep an eye on it. While on the balance of averages everything is going to be just fine, ultimately you’re responsible for your own future and you should have a financial planner there to help you, to guide you, to assist with your decisions – but they are your decisions, not theirs.
This list covers the main points we believe are noteworthy, but if you know of one that should definitely make the list, let us know through our contact page, we’d love to hear from you.