Financial Planning

Important Factors To Consider Before Choosing A Financial Advisor

A financial advisor is a qualified professional in financial planning, who can help you best manage your finances and achieve your financial goals. While financial advisors are legally required to act in the best interests of their clients, this regrettably does not always occur in practice. Unfortunately, victims of negligent financial advice can often suffer devastating financial losses.

To protect yourself against financial negligence, read on to find out more about the important factors to consider before choosing a financial advisor.

ASIC’s Financial Advisers Registers

ASIC’s Financial Advisers Register is a public record of all persons who are employed or authorised to provide personal financial advice to their clients. Its purpose is to help investors verify that their financial advisor is authorised to provide advice, and to find out more information about their qualifications and history before acting upon their financial advice.

Qualifications

A financial advisor should inform you of their relevant qualifications, including the type of qualification they hold and the length of their studies. This may range from a diploma or advanced diploma to a degree in either finance, economics, accounting or financial planning. The longer a course of study, the more comprehensive knowledge the financial advisor should have.

Client base

Before choosing a financial advisor, you should consider the type of clients that they typically work with. Does the financial advisor work with other clients like you? For example, if the financial advisor’s client base primarily consists of young clients, and you are nearing retirement, they may not be a suitable choice for you. It is best to select a financial advisor who deals with clients who have similar issues and goals to you.

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Track record and performance history

Before choosing a financial advisor you should find out about your financial advisor’s track record by simply asking them. If the financial advisor has had a successful history in generating a return, they are generally well-equipped to give financial advice. However, if your financial advisor says that they can guarantee you a return, they have infringed upon the law as financial advisors are prohibited from guaranteeing clients a return. If what your financial advisor says appears too good to be true, is it best to err on the side of caution.

Disciplinary action

You are entitled to ask a financial advisor whether they have been subject to any disciplinary action. If you believe your financial has been disqualified or banned from giving you advice, and they have not expressed this to you, you can use the Financial Advisers Register to confirm their legitimacy.

Costs

Before choosing a financial advisor, it is best to know the costs associated with receiving their advice and whether you are willing to bear these costs. The cost of engaging financial advisors does vary, and some advisors will be more expensive than others.

Financial advice can be either a one-off event or ongoing. Once-off advice may involve a recommendation on a specific issue, whereas ongoing advice involves regular reviews with your financial advisor to continually monitor your financial position and investments. The costs for ongoing advice are greater than one-off advice.

In the event that you should not proceed with any recommended investments or strategies, you are still expected to pay for the financial advisor’s cost of preparing your recommendations. For ease of comparison, and to avoid any misunderstandings, ensure that your financial advisor states any costs in dollar figures, rather than as a percentage of investment required.

Communication

If you have agreed to receive ongoing advice, you financial advisor should inform you of how they will communicate with you to keep you updated on your financial situation, and when you should expect to hear from them. This may include regular reports being sent to you, as well as regular reviews with your financial advisor. You should also clarify with the financial advisor as to when and how you are to contact them with any questions between reviews, and whether there are any additional charges for contacting them outside of your set appointments.

For more information on financial negligence or financial negligence claims, get in touch with Schreuders today.

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