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

• Financial qualifications and experience – What training and qualifications does the adviser have and what is their employment history? Are they a member of a professional body for financial advisers? Does the adviser mainly work with retirees, wealth accumulators or young families?
• Products the adviser can recommend – Check ASIC’s Financial Advisers Register on the MoneySmart website to ensure the adviser is authorised to provide financial advice and the product categories on which they are permitted to provide advice. 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?
• How the adviser charges fees – Which fees are charged at fixed or hourly rates and which are percentages of the amount you have to invest? Will the adviser calculate a percentage-based fee in dollar terms so it’s easier to understand?

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. Consider meeting several different advisers before you make a choice.
• Proposal: You receive a written proposal outlining your financial goals and the likely costs of the advice. (If you decide to follow the advice provided there will be an additional fee for implementing it.)
• Adviser meeting: In-depth meeting to explore your requirements, goals and current financial situation. This involves completing a fact find about your personal circumstances, finances and risk profile. You agree to accept the adviser’s fee proposal.
• Research and analysis: The adviser reviews your personal information, risk tolerance and goals to identify appropriate strategies and suitable financial 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, risk profile and personal 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. You will need to formally agree in writing that the information this document contains about you 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, government benefits 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)
• Assets: your home, car or other assets of value
• Debts: mortgage, credit card and loan 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
• Estate plan: Will and power of attorney
• Professional advisers: your accountant and solicitor

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, insurance protection or estate planning.
• Limited or single-issue advice – limited advice on a specific issue 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, lifecycle analysis or sensitivity analysis.

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:

• Information about how the advice addresses your financial goals and personal situation
• Accurate information about your financial position, assets, debts, income and expenses
• Your risk profile
• What the advice covers and doesn’t cover
• Risks involved with the recommended investment products and strategies
• How the recommended products align with your financial goals and situation, time frame and 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.
• Details of all the fees you will pay, how they are paid and who receives them.

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.

When paying an ongoing fee for advice, you should receive a fee disclosure statement (FDS) every 12 months so you can see the fees you’ve paid. Generally, you need to opt-in to an ongoing fee for advice arrangement every two years.

If you are paying for ongoing advice, ensure you keep your adviser updated about any changes to your financial situation (such as changes to your income or assets) or willingness to accept financial risk.

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.