Hi guys
As promised, here are a few questions you might like to use when interviewing a financial adviser to determine if you want to work with them. And as always, the following is general advice and has not taken your circumstances into consideration. All care and no responsibility.
I’ve rambled a bit, so if you don’t want to read it all, the questions are highlighted in yellow.
As part of your due diligence, you should check the ASIC register to see if the adviser is licenced (Melissa Caddick wasn’t) and has there been any previous “form” for the adviser you are potentially going to meet.
https://moneysmart.gov.au/financial-advice/financial-advisers-register
And don’t be afraid to ask for a reference from one of their clients’ so that you can ask them about their experiences with the adviser. Of course, it’s probably going to be one of their favourites who they’ll refer you to, but nonetheless, you’ve then got the opportunity to ask about non-investment matters such as timeliness of response by their adviser, level of proactivity, delivery on their promises, etc, etc.
In addition to being ready to provide them with factual information at your first meeting, I would strongly encourage you (and your partner if you have one) to spend some time before the meeting, writing down your BIG goals that you want to achieve. What I mean by big goals are goals that require money AND planning to achieve. And further, I urge you to have a specific date by when you want to achieve the goal. For example, if you wanted to have say, a deposit for your first home, it might be “I want to have saved $50,000 by my 28th birthday” or “we want to take the grandkids to Disneyland on 1st July 2025 and we want to fly Premium Economy”. You’ll also want to have a dollar figure in mind for each goal. And while the final dollar amount may change (inflation, exchange rates, etc), in my experience, the more specific you are, the more focussed you’ll be on achieving the goal.
Most advisers in the industry are technically competent, which is fine. But to paraphrase Howard Marks, this is “first level” thinking. When you go to your GP, you expect them to know how to prescribe the appropriate medication for your ailment. The real value then is to find an adviser who possesses “second level” thinking which I will expand on below.
Having prepared yourself with your goals to discuss with your adviser, I believe leads to one of the most important, if not, the most important functions of a financial adviser is holding you accountable to achieve your goals. And so, if you’re getting to the end of your initial meeting and accountability hasn’t been raised, I would suggest asking them, “I noticed you haven’t mentioned how you’ll keep me accountable to achieve my goals. Can you outline specifically how you intend on doing this”? And if you already have an adviser who has never talked about accountability, that sounds like a conversation for your next meeting!
If the adviser HAS discussed mutual accountability as part of the ongoing relationship, you may very well have found yourself a good adviser.
If the adviser seems to be in a hurry to discuss moving say, your super funds from your existing provider to the fund they support, it doesn’t mean that they’re doing anything untoward, but for me, it’s a red flag. If their rationale for moving your funds revolves around things like “we’ll have better oversight of your funds” or “industry funds aren’t very transparent”, it sounds to me that they’re talking with “Commission Breath” and I would ask them “apart from how this benefits you, how will this help me to better achieve my goals than if I leave the funds where they are”?
Remember, they can’t predict the future any better than you, so they can’t guarantee that their fund will do better than yours over a meaningful time period. But if you believe their reasons are cogent, such as “your fund has underperformed the industry average for 5 years”, then it may be worth considering.
IMPORTANT – if they do recommend you move your super to a new fund, and you agree to do so, check what insurances you have in your current fund and consider whether you want to retain those insurances. People have moved their super fund from one provider to another, only to subsequently discover that they are uninsurable! Not a good outcome if those insurances were important to you and your family.
Don’t be shy to ask them exactly what do you get for your fee. You could say something like, “can you outline exactly what services I/we will receive from you each year”?
And when it comes to fees, what sort of fee you can pay? If I were to seek out a financial adviser (especially if I had a large investment balance), I would only work with an adviser who charges a flat fee rather than a percentage.
It doesn’t guarantee better behaviour, but I would argue it probably does because if the adviser’s ongoing remuneration is a percentage and you tell them you want to withdraw say, $500,000 to buy an investment property, they have more motivation for you to keep your money where it is. If you’re paying a flat fee, their remuneration is unchanged and are therefore likely to be more objective.
Finally, if you’re planning on retaining the adviser on an ongoing basis, I would ask the adviser, “If we look back 5 years from now, how will we measure your success as our adviser”?
Hope this helps and if you have any further questions, by all means DM me.
Cheers
Rod