Over the last few weeks the Royal Commission has heard numerous accounts of the poor advice and behaviour of a number of financial planners and companies. Given these revelations how do people now go about selecting a top quality financial planner they can trust?
Whilst not foolproof, here are some common characteristics I’ve noticed in the high calibre financial planners I’ve come across who genuinely care about their clients:
Typically this includes a Bachelors degree in fields like financial planning, business, commerce, finance etc coupled with additional financial planning studies eg a Graduate or Advanced Diploma or Masters degree.
Transparency on how they get paid and any potential conflicts of interest
There are a number of ways planners can choose to be remunerated including fee for service, commissions, asset-based fees or a hybrid arrangement. Each has their pros and cons that we won’t discuss here, but in my experience having an adviser who demonstrates proactive transparency is imperative and allows you to then decide whether their approach suits you.
Not being significantly restricted in the products they can recommend ie they are not required to simply recommend products of the company they represent (or associated companies). If a recommended portfolio is heavily populated with “in house” investments, it’s worth further questioning and investigation.
Membership of an industry body ie FPA or AFA
I know both organisations have received criticism from the Royal Commission, but in my experience membership has generally been another good indicator of high quality planners. Members of these organisations are required to follow a code of conduct (although the Royal Commission has illustrated this is not always followed) and undertake significant ongoing professional education each year to ensure their skills remain up to date.
Whilst I’ve come across good planners who are relatively new to the industry I typically find the better ones have around 10 years experience. This might comprise 5 years in a “behind the scenes” technical role with at least 5 years providing advice directly to clients. This timeframe generally allows an adviser to have worked through different market conditions, together with more complex and varied client strategies.
These are certainly not hard and fast rules as I know of exceptions to all of the above, but I think they provide a good starting point when looking to hire a high quality financial planner.
The Royal Commission has highlighted much of what is, and has been wrong with the advice industry, but rest assured there are many high calibre advisers out there who provide excellent advice that transforms clients lives in a positive way.