Need to know
- One website we looked at, bestfinancialplanners.com.au, asks advisers to pay more to be listed higher up the page
- The main financial adviser industry bodies have their own find-an-adviser websites, but you should still put advisers through their paces
- ASIC has launched a consultation project with the financial advice industry – the aim is to improve consumer access to simple, reliable "single issue" advice
The first question to ask yourself if you're thinking about hiring a financial adviser is whether you actually need one.
If your finances are straightforward, you probably don't. And if you're in debt and wondering how to get out, the best option is to contact a free financial counsellor to discuss your options. (Read more on what to do – and what not to do – if you're in financial freefall.)
But if you're on the brink of a big financial decision – managing an inheritance, starting an investment portfolio, or figuring out the best way to access your super when you're eligible to do so – a little professional financial advice can save you from making an unwise decision that can really hurt down the road.
The first question to ask yourself if you're thinking about hiring a financial adviser is whether you actually need one
And with the economic fallout from COVID-19 still very much with us, the need for personal, rather than general, financial advice may be more urgent. (Personal advice is tailored to your individual financial situation, while general advice applies more generally, such as a bank teller recommending a term deposit as a savings option.)
The next question, if you do need a financial adviser, is whether you need ongoing financial advice.
Again, probably not. A fee-for-service approach generally makes the most sense, and if a sticky financial situation arises again you can pay for more one-off advice
Online financial adviser listings and reviews
There are a number of financial adviser (or financial planner) review and listing sites out there, some demonstrably less biased than others.
ASIC points to the established financial adviser industry bodies as resources for finding an adviser, the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA).
Association of Financial Advisers listings
The AFA has a find-an-adviser website called yourbestinterests.com.au (a nod to the FoFA reforms) that includes all AFA members.
AFA marketing general manager Natalie Kleibert tells us that the organisation does background checks on members and makes sure they're on ASIC's financial adviser register before allowing them to join. Members must also adhere to the AFA's code of conduct, which says members have to honour the spirit of FoFA and avoid conflicts of interest.
Klieibert tells us that breaches of the AFA code of conduct are investigated and that AFA members have been terminated for code violations.
Searching for advisers on the AFA site will turn up hundreds of advisers if you're near most capital cities, which may not help narrow down your options.
Financial Planning Association listings
The FPA website has a find-a-financial-planner function with various search options – by geography, name or company. You can also filter results to "certified financial planner" (CFP) only. As with the AFA site, you'll probably get a lot of results if you live in or near a big city.
An FPA spokesperson explains that the different search tools are called Match my Planner, through which consumers can find FPA-certified financial planners, and Find a Planner, through which consumers can find FPA members – as well as financial planners who may not have the CFP credential or be FPA members, but who "have met the high education, professional and ethical standards set by the FPA".
FPA members are not charged a fee for being included in either search tool.
Many of the advisers on the AFA and FPA websites likely still receive conflicted payments that incentivise them to recommend strategies that may not be in your best interestErin Turner, CHOICE director of campaigns and communications
FPA CEO Dante De Gori tells us that FPA members "represent best practice financial planning that puts the interest of the client first. We actively champion the need for a clear separation between product sales and advice".
He calls the FPA's CFP credential "the international gold standard and highest certification available to financial planners worldwide", and says CFPs "commit to additional education and higher ethical principles each year, above what is required by law".
The FPA says it investigates complaints against members and code of practice violations. According to its register of disciplinary action, 59 FPA memberships have been terminated since 2009.
'You still need to be wary'
But Erin Turner, CHOICE director of campaigns and communications, warns that caution is still advised.
"Keep in mind that financial advice professional bodies don't restrict their members from taking asset-based fees," she says.
"Many of the highly qualified and experienced advisers on the AFA and FPA websites likely still receive conflicted payments that incentivise them to recommend strategies that may not be in your best interest. You still need to be wary of how advisers are paid if you're using these sites."
Beware paid listing websites
One find-a-financial-adviser site we looked at appears to take a more mercenary approach to listings. In early November, we received a tipoff about bestfinancialplanners.com.au, a site that was positioning advisers on its web pages according to how much they paid.
The website says it lists the 10 best financial planners in Australia's capital cities as well as in Newcastle and the Central Coast, NSW; Geelong in Victoria; and the Gold Coast, Townsville, Sunshine Coast and Cairns in Queensland "based on our selection criteria".
To be the second financial adviser website visitors saw as they scrolled down the webpage, bestfinancialplanners was asking financial advisers to pay $199 per month plus GST (apparently the first spot was already taken). Position three was $149 per month, while position six was $99 a month (or $999 a year if the advisers paid up front).
One site we looked at was positioning advisers on its web pages according to how much they paid
The website is owned by leadhub.com.au, a business based on the Gold Coast.
We asked both bestfinancialplanners.com.au and leadhub.com.au to describe the selection criteria they use to narrow down to the top ten in each location, but we got no response.
Payments should be disclosed – ASIC
Without specifically referring to bestfinancialplanners.com.au, ASIC told us that comparison or aggregator sites should disclose any payments they receive for granting inclusion on the website.
Needless to say, we don't think an approach that implies one adviser deserves more attention than another because they're higher up the page, when in fact it just means they paid more, works in the interest of consumers.
Regardless of how you connect with a financial adviser, due diligence is essential before agreeing to take them on board.
Read our step-by-step guide on how to make sure a financial adviser is truly working in your best interests.
Make sure a financial adviser's advice is tailored to your individual circumstances and makes sense for your personal financial situation.
Finding a good financial adviser
Whatever your individual circumstances, the question remains: how do you find a qualified and trustworthy financial adviser?
It's an issue that the Australian Securities and Investments Commission (ASIC) is currently addressing in a consultation project with the financial advice industry, which was launched in late November 2020.
The consultation is focusing on "limited" or "single issue" advice, or the personal advice consumers seek out for a particular one-off issue. The goal of the consultation is to improve access to reliable, affordable advice of this nature.
Be wary about relying on consumer reviews alone when choosing an adviser. The most important factor we've seen that affects advice quality is conflictsErin Turner
Having access is one thing, but knowing whether the advice is good or not is another.
"Research shows that it's notoriously hard for us as consumers to assess the quality of financial advice," says Turner.
"We're buying advice and expertise when we seek financial advice, which means that we often end up assessing our advisers on factors we can easily understand like their friendliness, approachability or quality of communications.
"Be wary about relying on consumer reviews alone when choosing an adviser. The most important factor we've seen that affects advice quality is conflicts.
"At CHOICE, we think it is safest to use an adviser that doesn't take conflicted payments like asset-based fees. Conflicted or bad-quality advice can mean you lose your comfort at retirement, or savings and it can take a significant toll on mental health and wellbeing."
The limitations of FoFA
Under the Future of Financial Advice (FoFA) reforms that came into effect in 2013, advisers are legally required to act in your best interests instead of recommending financial products that aren't really right for you but deliver a nice commission for the adviser (something that happened all too often before the reforms).
The current law bans most, but not all, conflicted remuneration. Advisers can't accept commissions but can still take "asset-based fees" – a percentage of your investment. This kind of fee encourages advisers to recommend certain investments and means they make more with larger investment amounts.
The current law bans most, but not all, conflicted remuneration
In early December, the federal government introduced legislation recommended by the royal banking commission. Among other things, it requires financial advisers to disclose whether they have commercial relationships with financial product providers such as banks and insurance companies – and limits adviser fee deductions from default MySuper accounts to one-off rather than ongoing financial advice.
It's a welcome move, but you still need to be on your guard when seeking financial advice.