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With politicians continuing to tinker with the rules around super and retirement income, many of us find we need some help to make a decision about these important financial issues.
But while knowing you need advice is one thing, figuring out what’s on offer and where to obtain it is another matter.
To help, SuperGuide has created a simple step-by-step checklist to guide you through your financial advice experience.
Step 1: Understand what advice is available
Although it can be tough to know what you need if you’ve never spoken to a financial adviser, the first step is to ask yourself whether you want help with your overall financial circumstances or just one specific issue.
The rules around providing financial advice in Australia are very strict, with the main types being:
- General financial advice: This is general factual information about financial products and cannot include a recommendation or suggest a particular product is the best one for your particular situation.
- Personal financial advice: This is personalised advice by your financial adviser recommending a financial service or product after considering your individual objectives, financial situation and needs.
- Tax (financial) advice: When financial advisers recommend a financial service or product, they cannot provide advice about its tax implications unless they are registered with the Tax Practitioners Board. This includes the tax impact of commencing a salary sacrifice arrangement, transition to retirement pension, or your capital gains tax (CGT) liability if you sell some investments.
- SMSF advice: Financial advice is often necessary when establishing or running an SMSF. This is a specialised area requiring advice from an experienced financial adviser or an accountant with an Australian Financial Services Licence. For more information, read SuperGuide article SMSFs: What advice can an accountant provide?
Step 2: Check out free and cheap information services
Believe it or not, there are places to get free or low-cost financial information and advice – although it will not be tailored to your individual circumstances:
- Government agencies: The Department of Human Services’ Financial Information Service (FIS) and ASIC’s MoneySmart website are good sources of free information. The ATO website also regularly publishes information on super, SMSFs and tax-related matters.
- SuperGuide website and newsletter: Although SuperGuide does not offer financial advice, it provides lots of current information, articles and tools on the super rules, retirement planning and the Age Pension rules. If you’re not already a subscriber, consider joining SuperGuide Premium here.
- Super funds: Most super funds offer their members:
- Online tools such as website calculators to help you budget and manage your finances better, explore the impact of making extra contributions and work out the right level of insurance cover.
- Educational seminars on super and retirement. A financial adviser is often available to answer basic questions, but personal discussions require a follow-up appointment.
- Intra-fund advice on issues like choosing an investment option, salary sacrifice and personal contributions, nominating a beneficiary, how to maximise your super for retirement and your level of insurance cover. This is only simple advice and can’t cover switching super funds, financial products outside super or general retirement planning.
Step 3: Decide the level of paid advice you need
Although free or low-cost information is great, if you need more detailed advice you’ll need to pay for it. This is what ASIC calls personal advice, but you can still choose the level of advice:
- Limited or ‘scaled’ advice. This is advice about a particular issue and doesn’t take into account your full financial situation. It addresses a specific area or issue, such as whether to increase your insurance cover or the best way to make personal super contributions.
- Full or ‘holistic’ advice. If you need help with your overall financial situation through a comprehensive financial plan, you need holistic advice. This covers budgeting, retirement planning, starting a pension, investments outside super, insurance and planning how your assets and estate will be distributed after your death.
- Ongoing advice. With this type of advice your adviser monitors your investment portfolio and reviews your financial plan on a regular basis.
Step 4: Select who to ask for advice
Both limited and full financial advice is readily available from:
- Super funds. Most funds have licensed financial advisers on staff or have an agreement with a licensed advisory firm to provide advice to fund members. On-staff advisers are paid a salary and do not receive incentives, bonuses or commissions.
- External advisory firms. These are selected by your super fund, which often negotiates a set of principles to ensure the interests of fund members are protected. Some super funds permit super-related advice fees to be deducted from your super account balance.
- Advisory firms. Financial advice is available from small local firms, national advisory networks and licensed employees of the big banks. Whichever advice provider you choose, the individual adviser should be licenced and listed on ASIC’s Financial Advisers Register to ensure they have the necessary qualifications and experience. For more information, read SuperGuide article Super advice: How to find a suitable financial adviser.
Step 5: Work out the cost of advice
Fees for financial advice depend on the complexity of your financial situation and the services you need, plus the method of charging used by your chosen adviser. Typically, it’s free to attend an initial consultation to discuss your needs and the adviser will then provide information about the likely costs. If you decide to proceed, you will receive a written quotation to sign prior to a fee being charged.
Normal advice costs include:
- Statement of Advice (SOA) fee. Your adviser will write a formal document outlining their recommendations and financial plan. SOA fees are based on the complexity of your particular situation and vary considerably, ranging from a few hundred dollars to several thousand dollars.
Usually you can either pay the fee yourself or have the cost deducted from your investments. The SOA fee must be paid even if you decide not to proceed with the recommendations.
- Implementation fee. Once you accept the adviser’s recommendations, there is often an administration fee for implementing them. The amount depends on their complexity, but it is usually a few hundred dollars.
- Ongoing service fees. If you want ongoing services such as regular reports on your portfolio, or annual reviews with your adviser, these are additional costs.