Q: My husband and I are looking to start a SMSF and roll our industry funds into it. We have been able to find sources for the set up, accounting and audit of the fund and are now looking for assistance on the portfolio. We have a share portfolio outside super and so have some knowledge in the area but do not feel confident to make decisions about our whole super. I know you do not give investment advice but was wondering if you could suggest anyone that you know of that does. I understand that we will have to speak to and meet with anyone suggested and that the ultimate decision will be our own responsibility.
Trish’s response: I am often asked to provide names of financial advisers for individuals seeking financial advice, and unfortunately I am not permitted to provide recommendations of this nature.
Eventually, we hope to have a list of all ‘fee-based (or retainer) only and independent’ advisers but we don’t yet have the resources to undertake this project. This list will NOT include any advisers who retain the option of accepting commissions on wraps/platforms, or who retain the option of being paid via commissions on investment and superannuation products (with the possible exception of any commissions on life insurance products or mortgage financing arrangements, due to the transactional nature of those products). This list will NOT include any financial adviser employed by a financial organisation that also sells investment products, especially employed advisers who receives bonuses for recommending in-house products over other investment products offered by other organisations. In some circumstances, due to the structure of the financial advising industry, a financial adviser has no choice but to accept commissions from product providers. Advisers in this category will only be included in the list, if they full rebate those commissions to clients.
Note: The Australian Securities and Investments Commission (ASIC) provides some information on how to choose an adviser although I believe ASIC should already be providing a list of independent and fee-based advisers, or seriously considering such a service for investors. ASIC also suggests that you contact the Financial Planning Association but I have not been that impressed with the FPA’s position on removing commission-based advice, so although individual advisers who belong to the FPA may be independent, the FPA has not shown leadership in this area.
Recently, I received an email exchange from a financial adviser who had read a comment in one of my articles about the difficulty in finding an independent adviser. He mentioned that he was an independent adviser. I asked him how an Australian, seeking a financial adviser, can really know whether a financial adviser is independent, and how a person can actually find such an adviser. What David had to say makes very interesting reading. This is what he wrote:
I’ll make no bones about it, it is nigh on impossible given the industry is structurally corrupt and 80% of advisers are licensed or directly aligned with a product manufacturer or institution with a fair proportion of the balance just being glorified ticket clippers, so the odds of the poor old consumer finding independent, impartial advice is low.
Some will say being independent is a state of mind and about ethics which to a certain extent is absolutely true, but at the end of the day it’s the business model that drives behaviour so unless this is structured to ensure a ‘client first’ principle, consumers are always going to find it difficult.
If someone is looking for a ‘truly’ independent adviser, the sort of questions I would ask would include:
- Does the adviser receives a commission [initial or trail] or fee from a third party for any advice or products they provide the client? If they do, they are not considered to be independent as philosophically you can get paid from a third party on the one hand and claim to be independent on the other.
- Is the adviser licensed or aligned with a product manufacturer or institution in any way? If they are, then no matter how many other products they may be authorised to provide advice on, they are not independent and there will be incentives in place to encourage the adviser to sell the manufacturers products over the others and know amount of disclosure makes this right for the client.
- Does the adviser charge a fee based on the size of the client assets? This is typically referred to as ‘fee for service’ but the reality is just a commission by another name.
- Does the adviser receive equity, options or other incentives from their licensee depending on revenue they generate? If they do, they are not independent.
- Does the adviser’s FSG (financial services guide) disclose a conflict of interest? If it does they are not independent.
How do you know if the adviser is telling the truth about being truly independent?
If the fee section of the advisers FSG is more than half an A4 page long, the probability that the adviser is bending the truth is high.
The fee section of an independent adviser’s FSG would say something like…..
- We charge time and materials or an agreed fixed fee to provide the initial strategic advice, the implementation of that advice and the periodical review of that advice.
- Before undertaking the work, we will quote you fee based on the complexity of the work involved.
- Where a product is used [regardless of what type of product it is], we will rebate 100% of the commissions back to you.
- We have no ownership links to financial institutions or financial product providers.
- We have no conflicts of interest to declare.
- All employees are paid a salary and do not receive product commissions, brokerages or volume rebates.
- While we welcome referrals, we do not provide any incentive payment to the referring party nor do we receive any payment from other professional firms to whom we refer our clients.
The fee section took 7 lines but sadly many take several [if not seven] pages.
You may also be interested in reading the following articles:
- To DIY or not to DIY
- Is DIY super right for you?
- Getting real super advice
- Cheap financial advice now available: what does it mean for consumers?
- Six dangers when seeking super fund advice
If you’re seeking an independent resource on DIY super (including working out whether it’s the right option for you), then you may want to consider my book, DIY Super For Dummies (Wiley). You can find more information on the book, and how to order it, by clicking here.
Hi - I'm Trish Power and I am the author of 
As a start, you could refer to Brett Walker’s independent advice website: http://www.independent-advice.com.au – this website features 15 genuinely independent advisers around Australia that satisfy ASIC’s narrow definition of independence. We find it hard to believe that there are only 15 of us on record; we find it confusing why consumers would accept advice that is tainted with conflicts of interest.
Investment Advisers are held to a fiduciary standard. A Financial Adviser held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a fiduciary, they are required to act with undivided loyalty to clients. This includes disclosure of how to be compensated and any corresponding conflicts of interest. This is a sure fire way to tell if they are independent. Good Post Trish!