What is financial advice?
There are two types of financial advice:
General Advice
General financial product advice is advice that is given without taking into account your personal objectives, financial situation or needs. A financial adviser will normally point out when he is providing general advice.
Personal Advice
Personal financial product advice is advice that takes into account one or more of your objectives, financial situation and needs. At the conclusion of the process you should be provided with a Statement of Advice (SOA).
In order for an adviser to give you personal financial advice you will need to provide them with details of your personal objectives, current financial situation, needs and any other relevant information, so that they can offer you the most appropriate advice.
For receiving personal financial advice you will normally be charged a fee.
General advice and financial information, which is not personalised for you, can also be extremely useful.
Do I need personal financial advice?
Personal advice can be valuable, but will take time to prepare and will cost you money, depending upon the complexity and your requirements.
Not everybody needs personal advice. Many people handle their own finances successfully, including looking after their super, insurance and investments. But you will have to put in some time and be willing to learn, and keep-up-to date with changing legislation.
Personal advice is often required at various stages of your life and for many reasons. It may be sought to:
- Plan your financial affairs
- Build investments over the long term
- Invest a lump sum such as an inheritance or redundancy payout
- Protect your income or investments
- Figure out a complicated financial situation
- Plan major changes in your personal life, such as retirement
A financial adviser should review your total financial status and offer advice about what might make your assets work for you in the best way, taking into consideration your income, goals, objectives and attitude towards financial risk.
The earlier you develop a financial plan, the more likely you will achieve your financial goals and preferred lifestyle in retirement.
What services do financial advisers provide?
Most advisers tailor their services to your individual financial circumstances, but generally these include:
- Providing a range of investment options
- Investment planning
- Superannuation
- Planning for business owners
- Social Security benefits Retirement planning
- Tax-effective investing
- Insurance
- Estate planning
- Cash management
How are advisers paid for providing financial services?
Advisory businesses set their own fees, and can charge:
- A commission on products they sell
- A percentage of the assets on which they are advising
- By-the-hour for the work they do.
- You may be charged a combination of all these fees. Commissions and yearly percentage charges are very common.
- You’ll also pay fees to the company that issues the financial products you buy. These are set out in the relevant product disclosure statements.
When I receive advice, what should I get from my adviser?
When you receive personal financial advice, your adviser should give you a copy of their Financial Services Guide (FSG). This will detail such things as the services they provide, their fees and what commissions they receive for the services and products they sell you.
Before they give you personal advice the adviser should help you fill out a “fact find”, where you provide all the details around your personal and financial circumstances, including your current investments, mortgages, assets, superannuation etc. This will help them provide the right advice and products to suit your requirements and current situation.
How much will it cost to receive financial advice?
This generally depends on how complex your plan needs to be and how much money you have to invest. These charges are usually made through upfront commissions or a fee for service. Whatever the charges, the financial adviser will explain them clearly when they take you through the Financial Services Guide (FSG).
TIP: Make sure the initial consultation is free. Use the time to discuss your issues with the adviser and to determine if they are the right person to help you.
What questions should I ask an adviser?
When you first talk to an adviser, you need to ascertain if they are right for you; if they are appropriately qualified, what are the fees, how they get paid and whether they have the experience in dealing with the problems and questions for which you need solutions.