7-point guide to what happens when you meet a financial adviser

Choosing a good financial adviser involves doing some research and talking to several potential candidates. Issues to consider include:

• Financial qualifications and experience – Does the adviser mainly work with retirees, wealth accumulators or young families?
• Products the adviser can recommend – Check ASIC’s Financial Advisers Register to see which product categories the adviser is permitted to recommend. For more information, read SuperGuide’s Super advice: How to find a suitable financial adviser.
• Ability to advise on your existing investments – Is the adviser restricted to their company’s Approved Product List?
• Total advice fee includes any additional costs – Is the total advice fee disclosed as a dollar amount, or just a percentage of the amount you have to invest?

2. What to expect from the advice process

Every financial adviser operates differently, but providing financial advice usually involves:

• Initial discussion: Face-to-face conversation discussing how the adviser works through the advice process and what you want to achieve from it. This is usually free and is an opportunity to assess whether you will feel comfortable talking to the adviser about your private financial matters and personal goals.
• Proposal: You receive a written proposal outlining your financial goals and the likely costs of the advice (and implementation, if you follow the advice).
• Adviser meeting: In-depth meeting to explore your requirements, goals and current financial situation. This involves completing a ‘fact find’ about your personal circumstances and finances. You agree to accept the adviser’s fee proposal.
• Research and analysis: The adviser reviews your personal information and goals to identify appropriate strategies and suitable products and investments. This is used to prepare a personalised Statement of Advice (SOA).
• Presentation of the SOA: You receive a written document outlining the adviser’s recommendations and suggestions for appropriate financial strategies and investment products.
• Client agreement: You commit to pay the relevant fees for implementing the adviser’s recommendations.
• Implementation: The adviser puts in place the agreed recommendations and helps you complete any necessary investment forms.
• Ongoing advice: If you agree to pay for it, the adviser provides regular updates and an annual review to ensure their recommendations remain appropriate for your financial goals and situation.

3. Consulting your financial adviser

Once you have selected your financial adviser, the second meeting will be a more in-depth discussion. Your adviser will ask for detailed information to help him or her understand your current position so they can develop tailored advice on strategies to improve your financial position or achieve your goals.

The information is recorded in a ‘fact find’ or ‘client data form’ and you will be asked to formally agree the information it contains is accurate.

To get the most from this process, be prepared. Gather all the current information you have about your financial circumstances (and your partner’s financial circumstances), including:

• Income: wages, salary, interest, rental income and dividends
• Expenses: household budget and expenses (such as food, clothing, telephone, internet and council rates) and lifestyle expenses (such as gym memberships and annual holidays)
• Debts: mortgage, credit card and debt repayments
• Investments: statements from shareholdings, other investments and bank accounts like term deposits
• Insurance: life, total & permanent disability (TPD), trauma and income protection policies
• Superannuation: annual statements from your fund

4. Think about what you want to achieve

As you gather your financial paperwork, consider what you hope to gain from the advice process. Make a list of:

• Future lifestyle plans you want to achieve – paying off your mortgage early, retiring in a few years, or upgrading your home.
• Specific financial issues you want help with – consolidating your super accounts, building wealth or saving for retirement.
• Major life events – private schooling for your children, an upcoming family wedding or overseas holidays.
• Issues you don’t want advice on – switching your super fund or estate planning.
• Limited or ‘scaled’ advice – this limits the advice to a specific area such as increasing your insurance protection or starting a salary sacrifice arrangement. For more about the different types of financial advice, read SuperGuide article What are the different types of financial advice available?

5. Determining your risk profile

A key part of the advice process is identifying your attitude or tolerance towards financial risk. This helps your adviser select the most appropriate investment products and strategies for you.

Your adviser will ask lots of questions to ascertain how you (and your partner) feel about financial risk to ensure their recommendations are suitable. They may also use risk profiling tools such as detailed questionnaires, life-cycle analysis or sensitivity analysis.

For more about risk profiling, see SuperGuide article How to grow your super: Know your risk profile.

6. Expect a Statement of Advice (SOA)

Once your adviser has gathered all the necessary information about you and your financial situation, they will develop a Statement of Advice (SOA). The SOA is required by the Corporations Act to ensure retail clients receive enough information to understand the personal advice they receive and to decide whether to follow it.

An SOA should contain:

• Your risk profile
• Risks involved with the recommended investment products and strategies
• How the recommended products align with your personal approach to risk (risk profile)
• Pros and cons of following the recommendations, including any benefits you may lose by switching products
• How the recommended products will make money and how they will help you achieve your financial goals
• Reasons for choosing one product over another, or for suggesting you switch providers or super fund.

7. Opting for ongoing advice

Once your financial strategy and investments are in place, you can decide to pay for an ongoing relationship with your adviser.

This involves signing an agreement to pay for ongoing advice, which normally includes:

• Annual personal review of your strategy and investments
• Regular updates on the economy, markets and your investments
• Implementation of any necessary changes.

With ongoing advice, keep your adviser updated about any changes to your financial situation or willingness to accept financial risk. For more about your risk profile, see SuperGuide articles How to grow your super: Know your risk profile and Super investing: Should you change your investment option?

If your financial affairs are straightforward and you have plenty of time to manage them yourself and stay abreast of current market developments, you may not require ongoing advice.