Choose a financial adviser
It is important to choose your financial adviser carefully.
The person you choose is going to learn a lot about your personal affairs, and must be someone in whom you trust. A good, trustworthy, reputable financial adviser will not mind your enquiries into his or her history and reputation. An investment adviser must give you a written statement that contains information about the adviser and his or her ability to give advice. You are strongly encouraged to read that document and consider the information in it when deciding whether or not to engage an adviser.
Tell the adviser what the purpose of your investment is. This is
important because different investments are suitable for different purposes,
and carry different levels of risk.
The written statement should contain important information about the
adviser, including:
- relevant experience and qualifications, and whether dispute resolution services are available to you; and
- what types of investments the adviser gives advice about; and
- whether the advice is limited to investments offered by 1 or more particular financial institutions; and
- information that may be relevant to the adviser’s character, including certain criminal convictions, bankruptcy, any adverse findings by a court against the adviser in a professional capacity, and whether the adviser has been expelled from, or prohibited from joining, a professional body; and
- any relationships likely to give rise to a conflict of interest.
The adviser must also tell you about fees and remuneration before giving you advice about an investment. The information about fees and remuneration must include:
- the nature and level of the fees you will be charged for receiving the advice; and
- whether the adviser will or may receive a commission or other benefit from advising you.
An investment adviser commits an offence if he or she does not provide
you with the information required.
Some typical questions to ask a potential financial adviser:
- Are you
self-employed or do you work for a firm?
- What is your
role within the firm and who owns it?
- What are
your qualifications that will enable you to provide me with good
service and advice?
- What practical and professional experience have you had in giving investment advice?
- How do you select the investments you recommend and how do you determine what is suitable for me?
- What is your source of research?
- Do you provide a written financial report and what information is contained in that report? Look for a personalised financial plan that is based on your individual circumstances and meets your own specific needs and goals.
- What types of services am I entitled to receive if I become a client of your firm? Such services may include regular reviews on the performance of your portfolio, client newsletters and seminars. In addition, planners may offer insurance, tax and share broking services.
- Can you provide
the names of some existing clients who would be prepared to
endorse your company and its services?
Client confidentiality must be preserved. However a number of
companies have letters from satisfied customers who have been
pleased with the service they have received and have written to
offer their thanks.
- What fees
do you charge for:
Initial consultation?
A financial plan?
Annual or regular reviews?
Purchasing or amending a portfolio?
It is a good
idea to ask for an example of the fee structure including
the commission paid to the adviser.
After you have chosen a financial adviser you should expect
to pay for their expertise and service just as you would any
other professional. Remember that free advice may be worth
only as much as it costs.
Fees can be charged in various ways:
- the adviser
accepts the commission from the investment as their fee
- the adviser
rebates the commission and accepts a fee as their payment
- a combination of both.
Most fund managers pay commission to advisers. BT discloses these payments in the relevant offer document.
You may be interested in our Adviser Referral service where we recommend a financial adviser in your area.