Getting the right advice during difficult times

AUSTRALIANS already dealt a financial blow by the coronavirus pandemic are being warned not to fall victim to dodgy advice.

Financial Counselling Australia chief executive officer Fiona Guthrie fears many who have lost their job, or had their hours cut, will be lured into paying for services that promise to help make ends meet.

In many instances, Australians could take control of their finances without the need for external advice by contacting their creditors and asking to enter hardship arrangements, Ms Guthrie said.

“The problem with paying for advice is that the people you pay can be conflicted – sometimes really badly conflicted – and might not be offering the best solution for you,” she said.

“My worry about this is that there are companies out there that will offer to help you but they will end up charging you a lot of money to do it.”

She said short-term, highinterest loans – more commonly known as payday loans – should be avoided, while early access to superannuation should only be considered as a “last resort”.

Those overwhelmed by their situation should call the National Debt Helpline on 1800 007 007 and access free and independent advice from qualified financial counsellors, Ms Guthrie said.

Consumer group Choice’s spokeswoman, Erin Turner, said it was also important investors protected themselves amid the coronavirus pandemic by locking in fixed fee-forservice arrangements with their financial planner.

She said while assetbased fees, determined as a percentage of the total value of an investment portfolio, looked attractive in times of plummeting share prices, they could prevent investors from receiving holistic advice.

Property investment recommendations, for example, including advice to pay down mortgages, may be unlikely to be made under an asset-based fee structure because financial planners did not receive fees attached to property, Ms Turner said.

“The big risk with percentage-of-asset fees is it can skew the type of advice you will get,” she said. “Right now, the most important thing is that you get advice that is 100 per cent in your best interests.”

Catapult Wealth director Tony Catt said investors should only ever engage financial planners with clear and transparent fee structures that were not linked to any particular product or outcome.

“I’ve always said a fee-forservice option is more appropriate in the financial planning space because it’s fairer for both the client and the adviser,” he said.