There has been an increased amount of press on financial planners recently – particularly ones that work for CBA and Macquarie (click here for an example of the articles). The main criticism relates to the quality of advice (the blame on poor quality is the sales culture of large organisations and lack of training/qualifications). I believe the attack on the industry is broadly accurate.
Setting that debate aside for a moment, what advice do I have for people looking for a trustworthy financial planner? How do you avoid the dodgy ones? Here goes (in no particular order):
- Be prepared to pay a fair fee for advice. A good financial planner with many years’ experience will value the advice and experiences that they have to share with you and won’t share it for a fee of only a few hundred dollars. Most quality professionals (such as accountants and lawyers) typically charge an hourly rate of $200 to $400 and trustworthy financial planners aren’t any different.
- Consider conflicts of interest. Who do they work for? Who owns their business? How does the advisor get paid and how does the business make money? Make sure you find out all these things and consider how it will impact on the quality of advice. Almost always, it is best to avoid the large institutions (banks and fund managers) due to conflicts of interest. Find a planner that is independently owned and independently licensed.
- What advice do they give? The main growth assets are direct property and shares. Are they equally apt in both or do they specialise in only one. If you are not sure where to start then you probably want an advisor that employs an agnostic approach between shares and property.
- What is their investment approach and methodology and philosophy and is it sound? Do they have one? Does it make sense to you? How has it worked for other clients?
- How many years’ experience do they have? Do they have a well-rounded education? What about their tax knowledge (as tax is a big consideration when investing)? How many clients like you do they have? What is their typical client profile?
- How financially strong are they personally? Where do they invest their own money? You probably aren’t going to select a personal trainer that is grossly overweight and similarly you probably shouldn’t select a planner that’s not investing either. Integrity comes from doing yourself what you advise your clients to do.
The above is not an exhaustive list but it’s a very good start to help you find a quality financial planner – there are certainly some good ones out there (including us!).
As for the industry, we should start asking the same questions as above to ourselves!
