Should I do a background check of my financial adviser?

In light of the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, you may be wondering whether you should investigate the background of your financial planner. This article will discuss the importance of, and how to carry out these checks to ensure that your current or future financial adviser has the necessary qualifications and experience to manage your finances.

Although financial advisers are an invaluable tool when it comes to maximising your money and planning for retirement, it is an unfortunate reality that some advisers may not always act ethically and may sometimes even act illegally. Therefore, it is crucial that you conduct some background checks prior to engaging with a new financial adviser.

Meaning of financial adviser:

You may be wondering what being a financial adviser actually means. In order to be a financial adviser in Australia, there are several legislative frameworks that must be complied with. The Financial Advisers Register defines a financial adviser as an individual who is an Australian Financial Services (AFS) licensee or an authorised representative or employee of an AFS licensee. This certification authorises advisers to provide personal advice to clients concerning the relevant financial products appropriate to their client’s financial circumstances.

What is an AFS license?

An AFS license enables licensees to:

  • Provide financial product advice to clients,
  • Deal in financial product,
  • Make a market for financial product,
  • Provide a custodial service and,
  • Provide traditional trustee company services.

ASIC oversees the applications for AFS licenses to ensure that the financial services industry is tightly regulated. ASIC assesses applications based on the following criteria:

  • Whether the applicant is competent to carry out the financial services specified in their application,
  • Has the sufficient financial resources to carry out the proposed business and
  • Can satisfy the other obligations of an AFS license.

However, the granting of a license does not mean that ASIC endorses or recommends a particular financial adviser and therefore it is vital that individuals carry out their own background checks. To read more about the licensing requirements and criteria, click here.

Search their credentials:

The ASIC Financial Advisers Register can be used to find out an adviser’s previous places of employment, their qualifications, training, and what areas they provide advice on. This enables clients to check that their financial adviser is authorised to provide financial advice, as well as ascertain whether they have the relevant expertise to cater to their financial needs.

To carry out a search of your current or potential financial adviser you will their name, number, or ABN. Alternatively, you can search for them using the suburb or postcode they operate from. To conduct a search now, click here.

Website searches:

If you are thinking of engaging with a financial adviser, it is a good idea to carry out some searches on their personal or company’s website. This will provide you with a good indication of the adviser’s areas of expertise and whether they are relevant to the areas of advice you are seeking. A website that includes client testimonials and reviews is often a positive measure that the financial adviser has a good reputation and has been both trusted and relied on by previous clients. A larger company may also have Google Reviews which may provide you with a better understanding of their client’s experiences.

In conjunction with this, it is vital that you meet with your potential financial adviser prior to signing a letter of engagement or contract to receive their services. This is one of the most critical touchpoints as making a good first impression is likely to determine how your relationship with the adviser will progress. The adviser should ask questions around the following:

  • Your goals and objectives – short, medium, and long-term
  • Your assets and liabilities
  • Your expenses and budget
  • Your superannuation
  • Your investments such as property or portfolios
  • Any personal insurances you may hold.

In this meeting, a financial adviser must provide you with a Financial Services Guide (FSG) which outlines their relevant qualifications, license number and adviser’s fees. If the adviser is not open, transparent, and honest from the outset, you can assume that this is how they will continue when providing advice. Thus, reinforcing the importance to try before you buy.

There are a few rules of thumb to remember when meeting with a potential adviser. Firstly, if it is too good to be true, it probably is. Secondly, if you do not click with the adviser, look elsewhere. When choosing to engage with a new financial adviser it is important to not only carry out the background checks previously mentioned, but to also follow your gut instinct.

Carrying out any of the above checks could have prevented Melissa Caddick from defrauding her clients of $25 million dollars as they would have revealed that she was never registered on ASIC’s Financial Adviser Register and therefore was never a certified financial planner. These simple searches would have shown that she illegally used another financial planner’s AFS license number, which could have potentially saved those victims from being exploited.

If you are looking for a trusted and professional financial adviser to get your finances on track, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser. To learn more about our transparent fee structure and what you can expect to pay based on your circumstances, click here.



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