There’s no denying that financial advice is expensive, prompting many who would potentially benefit from it to ask themselves whether it’s something they really need.
Sarah Abood, chief executive of the Financial Advice Association of Australia (FAAA) says that for many people the answer is yes, for a few key reasons – and they are not what you might think.
Abood says these centre around non-financial outcomes such as peace of mind, and health and wellbeing.
“Financial wellbeing is connected with overall health and wellbeing,” she says.
“Cost-of-living pressures mean more people are worried about their financial future, and would benefit from financial advice to help manage their situation and provide peace of mind.”
Research by the FAAA shows people who use a financial adviser feel more confident and secure financially, and nine out of 10 say the benefits outweigh the costs.
Abood says the increasing complexity of the financial system is another tick in the column for seeking advice.
“The rules and regulations surrounding personal finance have become so complex over the years,” she says.
But with the average adviser charging fees of about $4000 for initial advice and $4700 annually for ongoing advice, according to figures from Investment Trends, it’s clear financial advice will not be affordable for everyone.
Due to the cost, conventional wisdom says the threshold for seeking advice is to have about $250,000 to $300,000 in investible assets.
Additionally, there are a few life events during which getting advice might help. These are when someone is approaching retirement, has come into a substantial sum, such as an inheritance (or winning the lottery), or is on the verge of a big life change such as getting married, having children or starting to invest.
AdviserRatings founder Angus Woods says questions people should ask themselves to decide whether financial advice could help them include:
- Do you control your money, or does it control you?
- Do you have enough money, and what is enough?
- Are you making the most of your money, or could your savings or investments be working harder?
“If money feels confusing, stressful, or like something you’re avoiding, it might be time to get some expert help,” he says.
Do your homework
If you’ve decided to seek financial advice, how do you choose between the thousands of licensed financial advisers working in Australia?
As a first step, many people ask friends, family and colleagues for recommendations. This could help to find an adviser who works with people of a similar age and financial situation as yourself.
Woods and Abood also recommend doing your homework on an adviser, such as consulting the ASIC financial advisers register, the FAAA’s Find a Planner tool, or the AdviserRatings website.
These provide information about qualifications, training, the areas an adviser is licensed to provide advice on, any specialisations they may have, any industry or professional bodies they are members of and reviews from other clients.
“Once you’ve identified some advisers, check their websites for their Financial Services Guide, a document that explains their fees, services and how they deal with complaints,” Abood says.
Many advisers will offer a free, no-obligation initial meeting to enable both parties to assess whether they are a good fit.
“We would suggest meeting with at least a few potential advisers first, before you make your decision on who to work with,” Abood says. “It’s an opportunity to ask plenty of questions, and a good adviser will listen carefully, answer your questions clearly and explain what kind of advice they can offer you.
Woods adds: “You should feel comfortable with them. Money is very, very personal, and you should feel like you can trust your planner.”
