Financial health check
Tuesday 1 May 2012
If you’re on the hunt for a good financial adviser (and if you’re young, think about it—it’s not just for the oldies) note that change is in the air. The financial planning industry is undergoing a major shake-up following the release of two recent reports.
Last month the Australian Securities & Investments Commission released the results of research examining the quality of financial advice given to people planning for their retirement. The findings? While 58% of respondents received adequate advice, in over a third of cases advice given to clients by financial advisers was poor. Now that’s a sobering statistic.
And the Federal Government has just announced further changes to the rules for financial advisers (due to come into effect in 2013) that it says will eliminate current conflicts of interest, including banning commission payments and requiring clients to ‘opt in’ every two years if they want ongoing advice (changes welcomed by consumer advocacy group Choice).
So what does this mean for you? In the words of Johnny Howard: be alert, but not alarmed.
If you’re looking for financial advice it’s OK to be wary, but remember that there are many financial advisers out there who are committed to helping you secure your financial future. While they don’t have crystal balls, they are in a position to help you choose financial products that best suit your needs; the trick is in finding one that you can trust. If you’re on the hunt, here are some tips to help.
1. Educate yourself about your finances first, even if you do plan to see a financial adviser. That way, you’ll go in with your eyes open and you’ll better understand the financial options that are presented to you. There are plenty of great books on the market, including Money Makeover (shameless plug!) and financial websites with lots of information to get you thinking.
2. Don’t put it off—we know that the thought of talking to someone about your money is probably as about as appealing as a visit to the dentist, but the sooner you do something about sorting yourself out the less you’re going to have to worry about money in the future. It might be challenging to hear you’re going to need to pull your socks up investment-wise in order to avoid a retirement on the pension, but the younger you are when you do the less painless it’s going to be.
3. Until the new financial planning laws come into effect in 2013 you’re going to have to do a bit of research to find yourself a financial adviser who charges by fee instead of commission. Fee-for-service is often recommended as the smart way to go as you’re more likely to receive impartial financial advice and it could end up being a lot less expensive too (commission fees can really eat into your savings once your investment grows). Check out MoneySmart for tips on choosing a financial adviser. Ask your friends and family members if they have an adviser they can recommend. And your accountant or HR Manager at work might even be able to give you a few leads.
4. A good financial adviser won’t only talk to you about your goals and write up a personal financial plan, they’ll also be able to help you sort out income protection insurance and life insurance (if you need it). These products are notoriously convoluted and difficult to compare and a professional will help you to make sure you take out the right insurance to suit your needs.