07 5440 5794
SCHEDULE A CALL
wetalkmoney
  • Home
  • Approach
  • Services
  • About
  • Blog
  • Contact
  • Home
  • Approach
  • Services
  • About
  • Blog
  • Contact

17/7/2018

The most important questions when choosing an adviser

 
Picture
It’s not asking for much. People just want advice they can trust.

This basic standard of care in my profession, financial planning, can be variable.

ASIC, the government watchdog, has pages of information dedicated to helping people find the right adviser for them (perhaps the amount of info they have produced sends a message in itself - be careful!). They recommend a series of questions about qualifications, experience, who the adviser is licensed to etc. etc. All really valid questions, you can find them here.  I strongly suggest you use them.

But if it were me looking for an adviser, the answers to the following questions would be of the most interest to me.
  • “How do I pay you?” 
  • “Who else is paying you?”
  • “What other benefits do you get if I buy your product?”

Why?  Because they all relate to “Conflict Of Interest”.

The highly publicised failure of Storm and the more recent advice issues with Macquarie and Commonwealth Banks (and pretty much every scandal in between), has a Conflict of Interest at the core of the poor advice practice.

Let there be no mistake, advice is too often distorted by Conflicts of Interest like commissions, sales incentives and other kickbacks and ties to big financial institutions and product providers.

The question, “How do I pay you”, is not just about how much you have to pay, but how that is calculated.  Fees are typically based on a percentage of how much you have invested.  The more you invest, the more the adviser earns.  And for your adviser to be continue to be paid, you must remain invested. Think about that next time you ask about buying a property or going to cash. Ask “why” your adviser charges this way?

While some financial professionals only make money directly from clients, the second question – the who else one — can reveal other sources of income that may represent a conflict of interest. Compensation can include things like commissions, bonuses, fee sharing arrangements, marketing allowances, sponsorships, product margins or other sales incentives based on the products or services sold to you. 

As a follow-up, you can ask, “What other benefits do you get if I buy your product?” 

Most planners work for, or are aligned to, product distribution. They are, therefore, incentivised to sell those products.

And what can be really telling is how people react to these questions.

I want to stress that answering “Yes” to any of these questions doesn't mean you can’t or shouldn't work with these professionals. It's just information you need so you can put the advice you receive in context.  You need to know what conflicts influence the recommendations you receive so you can weigh up whether the advice really is best for you.    Only then can you begin to understand if the professional sitting across from you is the right person to give you advice you can trust.


The lives of most of Australians would be improved by quality financial advice. If you or clients are seeking advice, make sure it is the right type - fixed fees with no conflicts and ties to product providers.  More on that here. 

Picture
Disclaimer - This article and/or opinion is based on generally available information and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider obtaining financial, tax or accounting advice on whether this information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. See full Terms and Conditions here.
Peter Siviour
16/4/2015 10:45:39 am

Tony, surely there are more important things than how someone gets paid, what about experience or certifications?

Tony Sandercock
27/4/2015 11:05:11 am

G'day Peter,

There are many, many valid questions. Yours included.

My point is, those advisers within a conflicted advice model, no matter their experience or certifications, remain conflicted. Despite their best intentions, your advice will get back to the products there are incentivised (or compelled) to sell. That is how the advice is funded (partially at least).

Choose advises wiith the experience and certifications you desire, but without the conflict. By definition, the advice you receive has to be more in line with your needs, as opposed to the product providers.

John
18/8/2015 11:18:21 am

Hi Tony,

As you don't make commission, how exactly do your clients pay you? How do you make profit? I like the idea that I don't pay commission, but you need to be paid? How does it all work?

Thanks


Comments are closed.
    Get Our Updates

    Author

    FPA Awards - Tony Sandercock CFP - Certified Financial Planner of the Year 2016
    Picture
    The Huffington Post
    The Sydney Morning Herald
    The Age
    Picture
    Money and Life Magazine
    Brisbane Times
    PS News
    Starts at 60
    Seniors Newspaper

    Categories

    All
    Advice
    Behaviours
    Case Study
    Cashflow
    Debt
    Fun
    Insurance
    Investment
    Motivation & Opportunity
    Planning
    Retirement
    Saving
    Strategy
    Tax
    Wills And Estates


    RSS Feed

wetalkmoney logo
Contact Us
Get Updates

wetalkmoney © 2020 - Terms and Conditions  - General Advice Warning - Financial Services Guide - Privacy​

Anthony Sandercock (AR 287974) and TTLB Investments Pty Ltd T/A wetalkmoney (CAR 467267) are authorised representatives of
Boston Reed Pty Ltd AFSL 225738 ABN 89 091 004 885