Spotting The Wolves
Do you know how to spot the difference between good and bad financial advice?
In broad terms, good financial advice is tailored to your unique circumstances. Bad financial advice is simply inappropriate and is not tailored to your personal situation. While good financial advice can help you reach your goals and achieve success, bad financial advice can have serious ramifications, up to and including losing your life savings or even your family home.
The good news is that recent Future of Financial Advice (FOFA) reforms have been designed to see financial planning advisers place your best interests first.
So what does good advice look like?
To ensure that you are receiving the best possible financial advice, here are some hallmarks of what you should be looking for:
- A financial adviser from a reputable company.
- Advice that takes into account your goals and objectives.
- Advice tailored to your specific needs.
- A structured plan. If investments are changed on a frequent basis, transaction/brokerage costs and/or capital gains tax can significantly detract from the overall performance of your investment portfolio.
- Investment advice that takes into account your tolerance of risk.
- A flexible approach. Given the rate of legislative change and new products available, the advice you receive should be regularly reviewed to ensure you’re keeping up to date.
- Full fee disclosure. Make sure you are aware of what costs will apply before you invest.
- Transparency. Before you invest, ensure you are fully informed of the risks, benefits and costs.
- Frequent communication. You should receive regular reports on the progress of your investments and online access so that you can track your investments.
- Good past performance figures. Ask your adviser to provide relevant performance information over a sufficient period to give you a balanced indication of past performance (eg, 5 or 10 years).
Perhaps of most importance is to make sure you understand and are comfortable with investments before you sign on the dotted line. Don’t be fooled by the old sayings “now is a good time to invest” or “buy what’s hot.” and never be afraid to seek a second opinion from another professional financial adviser. Remember it’s your money and it’s your future.
Chris Youssef is a Private Client Adviser in Shadforth Financial Group's Southbank office. Committed to ongoing education, Chris currently holds a Masters of Commerce (Finance & Financial Planning) and a Bachelor of Commerce (Marketing, Finance & Financial Planning) from Deakin University in Melbourne. To learn more about Chris, view his online profile.