How to find a financial planner you can trust

A good financial planner can help create freedom and security for you and your family. But with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry currently in the spotlight, finding a financial planner that you can trust has never been more important. We strongly recommend you thoroughly investigate who you choose to work with. It goes without saying that they should have appropriate licensing, registration and professional credentials, but what else should you consider? To help you find a credible financial planner, here are five questions that you must ask.

How do you charge your clients?

Financial planners earn money either from commissions, by charging a fee for their services or a combination of the two. Be aware of advisors who earn from commissions when they sell a product to you. This will often influence their advice as it’s likely to be limited to, or skewed towards, the products they earn commission from. To be confident you’re getting the best advice for your personal situation, look for an advisor with a fee-for-service payment structure. This means their revenue comes from the service that they provide you and isn’t linked to how you invest.  Keep in mind, however, that if the fee is in any way linked to the type or amount of investment that you make, it’s not a genuine fee for service.

How much do you charge your clients?

Be cautious of financial planners that are cheap as it’s likely they’ll either be relying on commissions or providing low-quality, cookie-cutter advice that isn’t tailored to your individual situation. To help you consider what may be an appropriate fee to charge for quality advice, have a think about what other service providers charge per hour and the number of hours it will take to build a plan for your future. For example, a financial plan could consist of five hours of face-to-face meetings along with 15 hours of research, analysis and administration.  If you were being charged $1,000 for this, you’re paying $50 per hour for your financial advice, so highly likely that the financial planner is receiving commissions from the products that they’re recommending.  Remember, quality advice is an investment in your future. A good advisor should also be able to demonstrate that what they’ll help you achieve will far outweigh the fees they charge.

Are you owned by or connected to any institutions?

Look out for financial planners that are owned by or connected to other institutions such as banks or superannuation companies as they often rely on commissions or subsidies. As explained above, advisors that earn from commissions are likely to provide biased advice. Even if they are not earning a commission, this potentially intimate relationship with a bank or superannuation company will materially impact what they can recommend to you. To ensure that the advice you get is the most appropriate for your personal situation, go with an advisor that is privately owned with no associations.

Do you offer more than investment advice?

Be wary if a financial planner doesn’t take the time to getting a deep understanding of your family and your desires for the future. Financial planning involves much more than just putting you into investments. It’s about life decisions and the impact they’ll have on you and your family financially. In fact, some of the best financial advice may not have anything to do with investing at all. Financial advice should look at your cashflow and savings, your tax and how you manage your overall financial affairs. Look for a financial planner that offers more than out-of-the-box investment advice and helps you establish where you are, where you want to be and work with you to create a plan to help you get there.

Where do you invest personally?

You may feel that this question is a little intrusive, but it’s quite logical and a good financial planner shouldn’t mind you asking! If they’re not investing into the same things that they are recommending to you, you may want to understand why. Be on alert for advice that seems too good to be true, get-rich-quick schemes and of planners that think they can outsmart the market. The only guarantee a financial planner should be making to you is to provide good advice that is aligned with your current situation, your appetite for risk and your long-term goals.