Engaging with a financial adviser may seem like a significant upfront expense, however, the value of this advice is often priceless. This is because financial advisers can help to prevent you from making mistakes that have long term repercussions and are often more costly than the advice itself. The following article will outline the process that takes place when you engage with a financial planner.
The Australian Securities and Investments Commission (ASIC) has suggested that more than 80% of Australians have never obtained financial advice and another 45% of the adult population are not financially literate. The below framework can provide you with a guide on what to expect when seeking financial advice.
- Finding an adviser
The first step is finding an adviser. This can be achieved through carrying out research online or speaking to family, friends or colleagues that have engaged with a reliable adviser. When choosing the right adviser you may wish to rely on the recommendation of someone you know or an adviser that you have found independently. Prior to your first contact with them, a very important step is to search the financial adviser on the financial adviser’s register on ASIC’s Moneysmart website. The will ensure that the adviser you are thinking of engaging with has the relevant qualification and holds an Australian Financial Services License. If they do not appear on the register, they are not a financial adviser.
- Initial meeting
Once you are satisfied that the adviser checks out, you can reach out to them to establish an initial meeting or consultation. This may be complimentary depending on the adviser and provides both parties with the opportunity to establish whether you are the right fit for each other. The adviser is likely to ask you questions about what you are seeking to achieve and any other basic information about your financial circumstances. It is also a good idea for you to see whether the adviser is the right one for you. This may involve shopping around and comparing which adviser you click with most.
- Fact find
Once you choose your adviser, they should provide you with some documentation such as a ‘fact find’ which will provide them with a summary of your current financial position as well as other information such as your risk appetite and your goals and objectives. The more information you can provide the adviser, the better they can understand where you are currently and where you wish to go on your finance journey.
- Engagement
After this, the adviser is likely to offer you a letter of engagement. This document outlines the services that the adviser will provide you as well as the cost. This process also involves determining the scopes of advice that will be addressed and their priority. It is very important to understand this document prior to signing it and ensure you are comfortable with the contents of it. Both throughout the process and at this stage it is vital that if you do not understand, or have any general questions that you ask your adviser so that you remain informed throughout the process.
- Data Gathering and Plan Creation
Once the engagement letter has been signed which indicates your consent to proceed, the adviser will continue to gather additional information to assist them in formulating a formal advice document called a Statement of Advice. To read more about what is contained within this document, click here. The strategies and recommendations outlined in this document will seek to achieve the financial goals and objectives you provided in the initial stages of the process. This document may also contain modelling and other alternative strategies to help you understand the proposed recommendations. This document will also provide you with the relevant warnings and risks which need to be understood before implementing the advice.
- Presentation
The Statement of Advice is then presented to you whereby the adviser will explain the proposed recommendations and how the advice will be implemented. The adviser should also outline the next steps should you wish to implement the strategies. If you have any questions regarding these or wish to amend the recommendations, it is crucial that you raise these prior to taking any further action.
- Implementation
Once you are happy with the advice and wish to proceed, the adviser is likely to begin to implement the advice. This is often accompanied by an additional fee on top of the Statement of Advice fee. Depending on your financial knowledge and expertise, some individuals may wish to implement the recommendations independently, however, this is often carried out by the adviser.
8. Future service agreement
Depending on the nature of the advice and its complexity, you may have an agreement with the adviser on a year-to-year basis. This is likely to include an annual review where they revisit your financial circumstances and ensure you are on track to achieve your short-, medium- and long-term goals. This agreement also incurs a fee that can either be a percentage-based or flat fee. EPG Wealth charges their clients using a flat-fee structure.
Financial advice has been reported to increase investors’ returns by up to 3.75 per cent. Therefore, although there is a cost associated with receiving financial advice, it can provide you with significant value working towards achieving your financial goals and objectives.
If you would like assistance with your finances or would like to begin your investment journey, please click the link to organise a 20-minute complimentary meeting with an EPG Wealth adviser.