NICK BRUINING: How to pick a good financial adviser from a dwindling pool

Headshot of Nick Bruining
Nick Bruining
The Nightly
Here’s some advice on how to avoid a lemon in the financial advice world.
Here’s some advice on how to avoid a lemon in the financial advice world. Credit: Image Source/Getty Images/Image Source

There’s a good chance that, sometime over the next few weeks, you may receive a letter from your financial adviser telling you they plan to retire at the end of the year.

While it’s unlikely to be mentioned in the letter, the imposition of new education requirements starting on January 1 may have something to do with the timing of their exit from the industry.

Almost certainly, it will include details of their replacement — but you should do your own research before just accepting what’s offered.

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That’s because in almost all cases, clients are “sold” to the replacement planner, and if the new planner works for a different firm, that could mean entirely new arrangements.

It’s not uncommon to be moved to a new fund or different investments if there is a change in licensee. That’s because advisers who aren’t independent are required to work off an “approved financial product list”, established by the licensee.

With such a dire shortage of advisers, that’s only going to get worse. Finding someone new could be an issue in itself, but that shouldn’t stop you from looking around. After all, you’ll be trusting that person to deal with your life’s savings, and poor or inadequate advice can have significant long-term consequences.

Your most important investigation should be on the moneysmart.gov.au website. In the search bar, type in “financial adviser register”.

That will take you to a search function which allows you to type in the name of any financial adviser operating in Australia.

As a starting point, their employment history will appear. Someone appointed as a financial adviser in the past six years will be the rolled-gold variety as far as education is concerned. That’s because they must have completed a financial planning university degree (typically four years full-time) and completed a supervised professional year.

Finally, they will need to have passed a mandatory ethics and standards examination set by corporate regulator the Australian Securities and Investments Commission.

In reality, the really well qualified advisers will be the younger people.

The MoneySmart site will also let you see how frequently they’ve changed licensees. Beware the person who seems to chop and change every few years. That could be a sign they’ve been ”moved on” or can’t fit in with the operating requirements imposed by licensees.

Licensees are answerable to ASIC for the actions of their advisers, so they impose internal procedures that are essentially there to protect clients. It also begs the question: What happens to the clients the adviser was looking after?

Down at the bottom of the page, you’ll see the education of your existing or prospective financial adviser. Here, you’re looking for university degrees.

If there’s only a Diploma of Financial Planning and/or a smattering of courses including things like self-managed superannuation or aged care, the adviser is almost certainly relying on the 10 years experience concession.

While that’s clearly some education, it’s regarded as being delivered at roughly TAFE-level teaching.

The bottom line is this: If they wanted to start work as a financial adviser today, they wouldn’t be allowed to.

One final point.

There are some truly excellent financial advisers out there who will be relying on the 10 years experience concession.

Many have qualifications that don’t exactly tick all of ASIC’s boxes but still provide excellent advice.

If you’ve had an ongoing relationship with your adviser through the good — and most importantly, bad — times, stick with them. You’re one of the lucky ones.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association

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