FREQUENTLY ASKED QUESTIONS

Your accountant may only give you financial advice on investments if he/she holds an Australian Financial Services (AFS) licence, or is an authorised representative of an AFS licence holder. ASIC's financial advisers register can tell you where a financial adviser has worked, his/her qualifications, training, memberships of professional bodies and what products they may advise on. Before seeking financial advice we recommend that you should watch our video 'Financial Adviser - The Facts and The Fiction'.

A financial counsellor can help you if you get into financial difficulty by helping you sort out your finances and putting strategies in place to help you better manage your money. Financial counselling is free. A financial adviser, or financial planner, can help you with things like wealth creation strategies, choosing investments and retirement planning, for a (often substantial) fee.

You should only seek financial advice from a licensed financial adviser who has relevant experience and is licensed to give the type of advice you need. You can find out if the adviser is licensed by searching ASIC’s financial advisers register. You are much more likely to receive advice that is in your best interests where your adviser works on a genuine fee for service basis.

A competent financial adviser can help you to develop realistic financial goals and put strategies in place to achieve them. A financial adviser, also known as a financial planner, can help you to:

• Identify short, medium and long-term goals
• Develop strategies to achieve your financial goals
• Better manage your money
• Develop an investment plan
• Choose tax-effective investments
• Make the most of your superannuation
• Find out if you’re eligible for any government assistance
• Work out your insurance needs
• Plan for your retirement
• Consider your estate planning needs.

Financial advisers don’t have any control over the ups and downs of public investment markets. Rather, as a general rule, your financial adviser’s role is to develop a longer term strategic plan using a diversified portfolio that will meet your and your family’s financial goals, taking account of your tolerance to risk, investing strategies, taxation consequences, estate planning and costs. Returns are an important element of this process, but clearly not the only one. Of course, you should keep an eye on the returns on your investments and compare them to returns you could earn on similar investments to ensure that they are not seriously underperforming. And if you have concerns, discuss them with your financial adviser. You can read more on our website about finding a suitable financial adviser.

Annual fees quoted in percentages can sound insignificant, for example, a 1% of $1 million. However, expressed in dollars, this fee is $10,000. Most people would view this as a large amount for which they would expect a significant amount of service. Let’s say your adviser’s hourly rate is $250. That would mean the adviser would need to devote a full week a year (40 hours) on your financial affairs. That’s a lot of time to spend on one straightforward client, so if your adviser proposes such a fee, you should understand exactly what is going to be done (and get it in writing), so you can evaluate whether you’re getting value for money.

Depending on the written contractual arrangement you have with your adviser, fees can be reviewed and renegotiated at any time (up or down). In addition, advisers are required to obtain your written annual consent of proposed fees for the coming year and of their method of collection.

You certainly aren’t required to appoint a financial adviser. Many people are willing and able to look after their financial affairs without one. However, others prefer to pay for professional guidance and advice to be reassured that they are making sensible investment and financial decisions, meeting all legal requirements and minimising their tax. Some people seek financial advice as a one-off or irregular event, whilst others appoint an adviser on an ongoing basis to advise/monitor their financial affairs on a regular basis (typically annually). It’s up to you, but whatever your decision, understand that financial advice can be expensive. So make sure you get in writing the scope and cost (in dollars) of advice before proceeding.

Some people are happy enough to contact just one financial adviser, based on a recommendation from a friend or another trusted adviser. That’s a legitimate course of action and is often successful. However, there is no harm in interviewing two or more advisers in order to compare and contrast expertise, fees and personalities. This is made a little easier because most advisers offer an initial 15-30 minutes free of charge discussion as a “getting to know you” meeting.

There is no difference. They are interchangeable terms. Anyone who uses these descriptors must be licensed and listed in the government’s Money Smart Financial Advisers Register.

No. However, they do have to possess certain educational qualifications and satisfy other requirements, such as being the holder of an Australian Financial Service Licence (or being licensed by one), meeting an annual commitment to regular professional development education, holding professional indemnity insurance and complying with a government-prescribed code of ethics/complaints procedure. They must also be listed in the government’s Money Smart Financial Advisers Register.

In a word, ’no’. Whilst licensed advisers must meet certain minimum educational and technical requirements, there is no “government guarantee” that an adviser will act ethically or in your best interests. We would hope that most licensed financial advisers would do so (since they are obliged to comply with a legislated code of ethics), however, it’s important to understand that many advisers in the industry are remunerated in a way that encourages them to sell financial products and services that may not be in their clients’ best interests. You can learn more about this by reading the Getting Financial Advice section of our website (make sure you watch the film).

The Australian Taxation Office operates a Superannuation Comparison Tool which is designed to compare and contrast the principal (large) publicly offered superannuation funds in Australia. There are commercial sites that also do this, but you should be aware that many of these have commercial relationships with financial services providers, so they may not be impartial. MSBS and DFRDB are not included in the ATO site.

Most people would reasonably assume that when financial advisers claim to be “independent”, then their advice will be impartial and free from conflicts of interest in the form of commissions. However, that may not be so. That’s because the word “independent” has a particular technical meaning in the financial advice industry which acts to dilute its everyday meaning. For example, advisers who claim to be “independent” also commonly use a form of commission called “percentage-based asset fees”. These are typically at a rate of about 1%-1.5% per annum and are deducted direct from clients’ investment funds. This is distinct from a conventional commission which is paid to advisers by a third party. The latter type of commission is banned on investment products (but not on life insurance). Percentage-based asset fees avoid the ban on commissions paid by third parties (although have much the same impact). Therefore, it will always be important to understand how an adviser and the adviser’s licence holder is paid or charges fees. It could have a substantial impact on their willingness or ability to act and advise in your best interests. Learn more by reading the Getting Financial Advice guide on our website and make sure you watch our film Financial Advisers - The Facts and the Fiction.

Yes. A mortgage broker is legally required to act in your best interests. However, it’s also important to understand that brokers are almost always paid commissions (percentages) by third party lenders. Therefore, they cannot earn a living unless they sell loans. This is a conflict of interest. While this should be disclosed by the broker, you should think carefully about whether you really need (and can afford) a loan and that the amount of the loan is appropriate for your purposes (that is, is it too high?). You should consider reading the Choice website for some useful education material on home loans and the government’s Money Smart article on comparing loans.

No. However, advisers who receive commissions or product sales incentives have a conflict of interest. It doesn’t necessarily follow that the advice they offer is poor, but because they are conflicted, they have an incentive to prefer their own commercial interests over yours. You should be mindful of this when assessing who to choose as an adviser and the appropriateness of the advice you are offered. Learn more by reading the Getting Financial Advice guide on our website and make sure you watch our film Financial Advisers - The Facts and the Fiction.

All the financial advisers in the Program have some knowledge of military superannuation arrangements. However, as with all groups of people on a panel, some have more experience and knowledge than others. Therefore, we encourage all ADF members and their families to speak with more than one adviser before settling on one that suits their needs. Having said that, knowledge of military superannuation arrangements is secondary to the ethics of the advisers and their willingness to act in your best interests. That’s why we require any financial adviser who is a participant in the Program to declare to Defence in writing that they don’t have remuneration-based conflicts of interest, including receipt of commissions, percentage-based asset fees and other product sales incentives. The advisers in the Program charge exclusively on the basis of hourly rates or flat fees. These vary (somewhere between $250 - $500 per hour), so wherever you go (within or outside the Program), make sure you understand the scope and cost of advice before proceeding. You can see a complete list of the advisers in the Program and an explanation of the basis for their participation at the Getting Financial Advice and Finding a Financial Adviser sections of our website.

Comprehensive financial advice costs more than most people expect. Think thousands of dollars, not hundreds for a comprehensive financial plan. The range is wide, often about $3,000 to $8,000 for an initial plan, depending on the complexity of the advice and the fee scale of the adviser. And then there may be ongoing fees which will vary depending on the services you’re seeking. Some financial advisers will offer limited or issues-based advice which will generally cost a lot less than comprehensive advice (sometimes called “holistic advice”). The main point here is to understand the scope of the advice and its cost, both up-front and on-going, before proceeding. Make sure you get it in writing. Some of this cost may be tax deductible which is something to discuss with the financial adviser of your choice. Most advisers will offer you a 15-30 minutes initial “getting to know you” consultation free of charge. It’s at that time, you should take the opportunity to discuss the scope of the advice you may need and its cost. There’s more about these issues in the Getting Financial Advice guide on our website.

Yes, some do. Many people find this convenient because they can get their tax returns done at the same place that they seek financial advice. The key point here is that the accountant/RTA must be licensed as a financial adviser. You can find out whether they are at the government’s Money Smart Financial Advisers Register. It’s important to note that some accountants have conflicts of interest and receive commissions/product sales incentives which brings into question whether they are offering advice in your best interests. You can learn more about accountants and their involvement in the financial advice industry in this article from our website.