There comes a point for many investors where they want to seek financial advice. While from the outset it may not seem as accessible for those with smaller budgets, a recent Vanguard/Investment Trends survey found that many SMSF trustees have unmet advice needs in several areas like pension and contribution strategies, estate planning and understanding updates to rules and regulations.

Before you seek advice, consider these questions in order to make sure you get the right adviser for you. 

Key questions:

What is your fee structure?

A financial adviser should always be upfront about their costs. Many will charge on a percentage of assets under management basis, but there are some who will charge a flat fee or hourly rate. According to researcher Adviser Ratings, advice fees are on the rise, rocketing more than 28% in the last to years. The firm attributes this to older planners leaving the industry as new professional standards come into effect. Investment trends data indicated that Australians are willing to pay on average between $340 and $530 for an initial advice consultation - but advisers are charging on average $2,671 for a statement of advice.

More on this topic: Putting a price on financial advice

Do I need to involve my family?

The majority of cases will be on an individual level and families won’t need to be involved. It should be considered, however, with elderly clients so the family is aware of where the money is held. It is not a bad idea to involve family but ask the adviser what they think to be best. Older children might be worth bringing along to a meeting; it may encourage them to start investing and seeking advice from an earlier age. 

What happens if you retire/the company is acquired? 

Many financial advisers work out of very small companies or even by themselves. If your adviser is nearing retirement age, it might be worth asking about the company’s plans for retirement or succession planning. While it should not affect you directly, it is worth noting their plans in case the adviser you speak to and built trust with chances. 

What is the cost of ongoing versus one-off advice?

Weigh up the cost of ongoing advice versus a one-off visit. There are pros and cons to each. If you have a smaller pot, ongoing advice may prove to be expensive. One-off advice can be used to set up goals, discussing inheritance and reorganising your financiers. Ongoing advice can be used for retirement planning, retirement income and ensuring you aren’t paying too much tax. This is typically for those with substantial assets to invest.

It should also be worth remembering that you are under no obligation to take the advice or stay on as an ongoing client. 

How do I know my money is protected? 

Your adviser should always inform you about what happens in the event of failure. While your money cannot be guaranteed, there are options for whether you have been mis-sold an investment. Financial advisers should recommend spreading your money across different investments but it is always safe to see how your money is protected. 

Are you able to invest in line with my beliefs? 

With the rise of certain thematic investments such as Environmental, Social and Governance (ESG) funds, it may be that you solely want to invest in line with your philosophies and beliefs. Make sure the advisers have the option to do this and be able to keep your views in mind. If they cannot, there will be others who can.

What type of investments do you favour, what do you specialise in? 

Financial advisers will generally have a preference over the types of funds they like to invest in. The active versus passive debate is still ongoing, and there are many pros and cons for each side. Check where the preference lies and whether you are comfortable with that given your investment goals. 

It's also worth asking the adviser how they'll monitor and manage your investments, and how often you'll receive information about your portfolio and performance.

Some advisers specialise in investment services, others in SMSF planning and others is delivering comprehensive advice. Consider why you're seeking advice, and ask what areas they specialise in, and whether there are any limits to the advice they can provide. An advisers Financial Service Guide should also show what services they offer.

Where is your money invested?

There is nothing wrong with asking a financial adviser what their investment philosophy is, and where they put their money. For instance, many fund managers put their money in their own funds as proof of their belief in their strategies, so it is almost certainly worth asking an adviser where they put their money to see if they have courage in their conviction. 

While it is not a direct question to ask, it is always worth doing your own checks on an adviser. For instance, a service like Adviser Ratings lets you see what other clients are saying.

What are your qualifications?

It may seem obvious that someone advising you on your life savings should have a relevant university degree, but historically, the industry has not insisted on it. However, stricter education standards are in the pipeline, and by 2024 all existing financial advisers must complete (at a minimum) an approved bachelor's degree and pass a code of ethics course to retain their licence. From 2019, entrants must complete an ethics exam, have an approved bachelor's degree, and complete a “professional year” to qualify for a licence.

Ask your financial adviser about whether or not they intend to meet the new requirements.

You can also check to see if your adviser has done anything wrong. This could include an ASIC banning order disqualifying an adviser from providing advice for a brief period or perhaps for life.

You can also check if the adviser is properly licensed to provide advice, or is an authorised representative of a financial services licence holder, ahead of the appointment, by searching for their name on the financial advisers register.

Some other questions worth asking:

  • How will you consult me on decisions and/or changes to my investment strategy?
  • What are your markers for success?
  • Which sources of information (and tools) do you use to inform your investment decisions and the products you select?
  • What commissions and/or incentives do you receive from financial products?

Emma Rapaport, editorial manager, Morningstar Australia contributed to this article.