Essential facts about financial advice

What is personal financial advice?
Who can give you personal financial advice?
Do you need personal financial advice?
What’s it going to cost?

What is personal financial advice?

Financial advice helps you make decisions about your money. Personal advice considers your own objectives, financial situation or needs, and then recommends strategies and one or more financial products to suit you. Good advice from an experienced, well-informed financial adviser can help you save money and become more financially secure.

General advice and financial information, that’s not personalised for you, can also be extremely useful.

Who can give you personal financial advice?

Generally, the only people permitted by law to give you personal financial advice are those who work for, or represent, a financial advisory business that holds an Australian financial services (AFS) licence. How to check whether a business or person is licensed

Licensed advice covers superannuation, insurance, shares, managed funds as well as many basic banking products.

When National Consumer Credit Protection legislation comes into effect on 1 July 2010, ASIC will be responsible for regulating credit products and businesses that sell, arrange or advise on them.

Anyone who engages in certain credit activities will need to register with ASIC between 1 April and 30 June 2010 (inclusive).

Registered credit participants will then have six months to apply for an Australian credit licence (ACL), between 1 July 2010 and 31 December 2010.

New entrants to the credit market will have to apply for an ACL from 1 July 2010. For more information see www.asic.gov.au/credit

An advisory business that gives personal advice must:

give personal advice that suits you
take legal responsibility for its staff and representatives
act efficiently, honestly and fairly, and
meet standards designed to protect you against something going wrong.

Read John and Lynette's true story about why you should only deal with licensed financial advisory businesses

Do you need personal financial advice?

Personal advice can be valuable, but will take time to prepare and will cost you money.

Not everybody needs personal advice. Many people handle their own finances successfully, including looking after their super, insurance and investments. You will have to put in some time and be willing to learn.

There’s a lot you can do to teach yourself about financial matters. More about learning about investing

Personal advice often helps most at turning points in your life. Here are some typical situations.

Life stage – Planning to retire
Advice you may need	Detailed advice about how to get the most income in retirement, without taking undue risks.
Benefits and cost of personal advice	Can save tax and make you eligible for valuable government benefits, including age pension. Depending on your circumstances, can be fairly costly. Check fees and any commissions that apply.

Life stage – Retrenchment
Advice you may need	Advice about what to do with your retrenchment payout, and whether to roll over into super.
Benefits and cost of personal advice	Advice can avoid expensive mistakes. Depending on your circumstances, can be fairly costly. Check fees and any commissions that apply. May better suit people with larger payouts.

Life stage – Changed financial needs, for example: - having children - inheriting money - paying off the mortgage at last - separating from your partner.
Advice you may need	Managing your new situation, broad advice about suitable strategies. Possibly recommendations about what financial products to buy.
Benefits and cost of personal advice	Advice can help you take control and make the most of your money. It can help you make important changes to address your changed financial needs. Depending on your circumstances, can be fairly costly. Check fees and any commissions that apply. Learning more about money and doing some of the basics yourself may be a less expensive option.

What’s it going to cost?

Advisory businesses set their own fees, and can charge:

a commission on products they sell
a percentage of the assets they’re looking after
by the hour for the work they do.

You may be charged a combination of all these fees. Commissions and yearly percentage charges are very common.

You’ll get a financial services guide that explains the adviser’s fees. Be prepared to shop around and to ask advisers to explain the benefits you’ll get for the money you’ll pay. We’ll say more about the importance of fees and commissions in Choosing your adviser and Does the advice meet your needs.

You’ll also pay fees to the company that issues the financial products you buy. These are set out in the product disclosure statement.

Further information

More about what you can expected from a licenced financial adviser and why you should only deal with a licensed financial services business

FIDO Website: Printed 07/31/2010