Noel Whittaker
Noel Whittaker

How to find a good financial adviser

"Where can I find a good financial adviser?" is my most asked question. My stock answer is: "That is no different from your asking me how to find a good doctor, accountant or motor mechanic. I really don't know."

Certainly look for an adviser who is a CFP (Certified Financial Planner) and who is a member of an industry body such as the FPA or the AFA.

I also hear "How do I know if a recommended strategy is appropriate?" That's an even tougher question because there could be a range of suitable strategies, and the client may be the only one who can make the final decision.

However, there are clues. First, does it address your needs as disclosed in the initial interview? The main reasons to seek advice are usually to start long term planning for retirement, or to invest a lump sum for a specific purpose. If your goal is to retire at 65, with an indexed income of $50,000 a year, the recommended strategy should set out how this is to be achieved.

A main factor to consider is whether the investment should be held inside super, and, if not, in whose name. Then decide what your overall asset allocation should be, and how the recommended investment fits into that.

The next issue is whether it is simple enough for you to understand. Has the adviser, and the Statement of Advice prepared by the adviser, explained the process in simple terms. Are you comfortable with it?

Are you conservative or are you a risk taker? Over the years, I've seen a lot of strategies which I regard as dangerous, because they are making you a target for the tax office. These include interest free loans to your super fund, and trying to avoid the death tax on superannuation by claiming your working children are dependants because you are paying part of their housing loan. It's your choice, but I prefer a good night's sleep.

The recommended strategy will almost certainly include investment in managed funds. Do you understand the fees that will be charged by the funds, and are you comfortable with how those funds work? For example, a balanced fund which invests across a range of assets, would be much less aggressive than a geared share fund, where the manager is magnifying the profits or losses by internal borrowing.

The adviser should clearly explain what would happen to your portfolio in the event of a market crash, and what kind of strategies could be put in place if the rules change.

If your affairs are complex, it's a good idea to involve your accountant and your solicitor to ensure that the recommendations are optimal, both from a tax planning and an estate planning perspective. Finally, make sure you meet with your adviser at least once a year to track the progress of your financial plan, and to make changes when necessary.
 



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