Hi Nicole,
Please help: We are a family of four and I have just gone back to work after being at home with my two now school-aged children for the best part of seven years. I am back teaching; my husband is a marketing manager. We've just trod water for the past seven years – I guess everyone does. Now we are very keen to make something out of our money but just don't know where to start or who to trust. I remember the global financial crisis and how many people were burnt by advisers. But should we get one? How do we get one?
Caitlin, Sutherland Shire
This is the single most common question I get asked, Caitlin. It was really interesting to watch how many people turned away from advisers after the credit crack-up, choosing instead to be "self-directed". After all, who cares about your money more than you?
The trouble is you may not have the requisite skills. Protecting and growing wealth is not rocket science, but it does take a little base knowledge.
Certainly there were people burnt by advisers in 2008 and thereafter – you may recall the terribly sad plight of clients with Storm Financial, which pushed people into gearing up, or borrowing, to the hilt.
But the fact is few investors were spared damage from the catastrophic markets of that time. Many advisers were also personally hit as they commonly have "skin in the game": they use their own strategies. And I believe they should have that much confidence in them.
Your two other key criteria to spot a good adviser are:
1. Scrupulously ethical – be prepared to pay a fee for advice rather than a built-in commission that varies from product to product and could bias what they recommend. The latter is now banned in most new cases (insurance outside super is the notable exception).
2. Highly skilled – in my previous life as editor of AFR Smart Investor magazine, I ran an exam designed to highlight the 50 most knowledgeable planners in the country. Unfortunately, this has been discontinued but former winners will still proudly advertise their inclusion. There are also awards worth looking for from the Financial Planning Association.
A recommendation from a friend or other service professional goes a long way. But so, too, does simply sitting down and virtually interviewing a prospect, for a gut feel. Ultimately, you'll need to feel relaxed and comfortable with an adviser – you are partially entrusting your future to them.
There is a tremendous new Financial Advice Toolkit from ASIC's Money Smart team that will give you the specific questions to ask, talk you through the advice process and also help you identify what you are trying to achieve.
Good luck!
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.