Q1. WHAT EXPERIENCE DO YOU HAVE?
Find out how long the planner has been in practice and the number and types of companies with which he/she has been associated. Ask the planner to briefly describe their work experience and how it relates to their current practice. Choose a financial planner who has experience in counselling individuals on their financial needs.
Q2. WHAT ARE YOUR QUALIFICATIONS?
Many financial professionals use the term ‘financial planner’. Ask the planner what qualifies them to offer financial planning advice and whether he/she is recognised as a CFP® (Certified Financial Planner). If not, why not? You wouldn’t accept a junior doctor performing knee surgery on you so why would you accept anything less than the most qualified and experienced adviser you can get – after all, you’re trusting them with your private financial affairs.
Q3. WHO IS YOUR DEALER GROUP?
The dealer group is the entity that holds the major license with the Australian Securities & Investment Commission (ASIC) and then provides the financial planner with the authority to begin work with clients as an Authorised Representative. The Dealer Group will make a decision on the planner’s services based on their knowledge and competency and they are ultimately responsible for the recommendations made. You really want to know if they are aligned to just one institution such as an insurance company or a bank. This is crucial because you don’t want advice based on just that bank or insurance company’s products. Is it product selling first and foremost? Or is it about you and your needs? A clue is whether they address those needs by providing fee for service, or are they paid on commissions?
Q4. WHAT SERVICES DO YOU OFFER?
The services a financial planner offers depends on a number of factors including credentials, licenses and areas of expertise. The list of services (among other things) is set out in their Financial Services Guide (FSG), which must be given to you at the first meeting or soon after. Planners can only provide services listed in their FSG. Generally, financial planners cannot recommend insurance or securities products such as shares without the proper licenses, or give investment advice unless they are an Authorised Representative of a Dealer Group, which holds the license with ASIC. The Dealer Group is ultimately responsible for the advice being given to you.
Q5. WHAT TYPE OF CLIENTS DO YOU HAVE?
Ask the financial planner about the type of clients and financial situations they typically like to work with. Some planners prefer to develop one overall plan by bringing together all of your financial goals. Others provide advice on specific areas, as needed. Make sure the planner’s viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.
Q6. WILL YOU BE THE ONLY PERSON WORKING WITH ME?
The financial planner may work with you themself or have others in the office assist them. You may want to meet everyone who will be working with you. If the planner works with outside professionals (such as lawyers, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.
Q7. HOW WILL I PAY FOR YOUR SERVICES?
As part of your financial planning agreement, the financial planner should clearly tell you in writing how they will be paid for the services to be provided.
Planners can be paid in several ways:
- A salary paid by the company for which the planner works. The planner’s employer receives payment from you or others, either in fees or commissions, in order to pay the planner’s salary.
- Fees based on an hourly rate, a flat rate, or on a percentage of your assets and/or income.
- Commissions paid by a third party from the products sold to you to carry out the financial planning recommendations such as insurance.
- A combination of fees and commissions, whereby fees are charged for the amount of work done to develop financial planning recommendations and commissions are received from any products sold. In addition, some planners may offset some portion of the fees you pay if they receive commissions for carrying out their recommendations.
PS, Please note, although upfront and on-going commissions have been banned on new investment products from 1 July 2013, the rules do not apply to insurance.
Q8. HOW MUCH DO YOU TYPICALLY CHARGE?
While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs should include the planner’s hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.
By way of guideline, a full and comprehensive financial plan (that covers all the issues mentioned in this book) will be worth $3,500 to $7,500. A financial plan that covers one or two specific areas would be much less, usually less than $1,500.
Q9. COULD ANYONE BESIDES ME BENEFIT FROM YOUR RECOMMENDATIONS?
Some business relationships or partnerships that a planner has could affect their professional judgement while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide you with a description of his/her conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or managed funds may have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you; such as business or commissions he/she receives for referring you to an insurance agent, accountant or a lawyer for implementation of planning suggestions. All of this really should be disclosed by the planner anyway but I encourage you to still ask the question.
Q10. HAVE YOU EVER BEEN PUBLICLY DISCIPLINED FOR ANY UNLAWFUL OR UNETHICAL ACTIONS IN YOUR PROFESSIONAL CAREER?
Several government and professional regulatory organisations, such as ASIC or the Financial Planning Association keep records on the disciplinary history of financial planners. Ask what organisations the planner is regulated by and contact these groups to conduct a background check. All licensed financial planners are registered with ASIC and you can quite easily conduct a search on their site at www.asic.gov.au.
