Find an ad­viser you can trust

Money Magazine Australia - - IN BRIEF - Stuart We­myss, au­thor of In­vestopoly

The royal com­mis­sion has made many Aussies cyn­i­cal about get­ting fi­nan­cial ad­vice. The most im­por­tant step in find­ing an ad­viser you can trust is to re­move any con­flicts of in­ter­est. To be truly in­de­pen­dent I be­lieve the ad­viser needs to sat­isfy five con­di­tions:

Take no com­mis­sions, re­fer­ral fees or kick­backs. This en­sures they are im­par­tial and have no per­sonal stake in the ad­vice out­come. They shouldn’t make any more or less money (fees/rev­enue) based on their rec­om­men­da­tions.

Of­fer fixed fees. They should not charge you a per­cent­age fee on your in­vest­ments be­cause this cre­ates a con­flict too. They should charge you a fixed monthly, quar­terly or an­nual fee for their ser­vice (or an hourly rate is fine, too).

Have noth­ing to sell you. The ad­viser’s busi­ness shouldn’t make money from sell­ing in­vest­ments. The best case sce­nario is that the ad­viser’s busi­ness has noth­ing to sell you. They don’t op­er­ate their own man­aged funds (shares), rec­om­mend di­rect shares (like a stock­bro­ker) or buy/rec­om­mend spe­cific properties (through a buyer’s agent). And they def­i­nitely don’t have any links with prop­erty de­vel­op­ers!

Be pri­vately owned with an Aus­tralian fi­nan­cial ser­vices li­cence (AFSL) and with no links to banks or in­vest­ment providers. It is im­por­tant that the li­cence owner is an in­de­pen­dent and pri­vately owned busi­ness. If the AFSL owner is a bank, for ex­am­ple, the ad­viser might only be al­lowed to sell bank-owned prod­ucts (or have a very nar­row list of other prod­ucts).

Demon­strate a deep knowl­edge of all as­set classes, es­pe­cially real es­tate and shares. It is im­por­tant that an ad­viser has a ro­bust un­der­stand­ing of how to in­vest suc­cess­fully us­ing any and all as­set classes. The main as­set classes in Aus­tralia are res­i­den­tial and com­mer­cial prop­erty, shares/eq­ui­ties, bonds and cash. How­ever, some fi­nan­cial plan­ners know very lit­tle about in­vest­ing in res­i­den­tial prop­erty. My view is that they should know both prop­erty and shares equally well to be able to reach a re­li­able con­clu­sion.

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