How to make sure you are getting unbiased advice

I’ve always had a love for money. Not in a greedy, selfish, Scrooge-like way that may spring to mind when you hear about loving money. I love how empowering it can be to understand and use money in clever ways. And I’ve always enjoyed numbers, and doing tricky things with them. But money has never been enough by itself.

When I graduated with my Masters degree, despite being offered respectable banking jobs in New Zealand, and even a technical daytrading role in Osaka, I instead decided to take a one year hiatus from finance and explored the culture and language of Japan. This quickly grew into a four year, completely life changing, reset. I was surrounded by such a diverse array of people. People with a deep-rooted history and strong traditions, but also interesting, creative people who allowed themselves to make decisions that aligned with what they value in life.

From those early days, my life has been full of things that I allow myself to gravitate towards, not only because they make sense but because they feel right. Just like our relocation to Brisbane in 2008.

Independent advice, like many of my greatest loves in life, was an unexpected discovery fitting this criteria. I had been advising for a number of years already when I first heard about independent financial advice. Also described as unbiased or impartial financial advice, for more than twenty years now it has been illegal for a financial adviser to describe themselves or their services as ‘independent’, or unbiased or impartial unless they meet strict legal requirements outlined in the Corporations Act 2001. And these rules literally set an independent adviser apart from the rest of the profession.

Put very simply, an independent financial adviser can’t have conflicts of interest as these conflicts could bias the advice they provide to the client. That means the fee paid by the client to the adviser for their services cannot be based on how much the adviser invests for them. It also means no gifts or payments can be made to the adviser when the adviser introduces a client to a professional or recommends a service or products.

In practice what this means is that an independent adviser typically charges a flat fee for service which doesn’t change as the amount you invest with them changes. They also don’t have inhouse products, and provide advice without receiving commissions or incentive payments from product or service providers once a client decides to go ahead with any recommended products.

Despite financial advisers being legally required to act in the best interests of their clients, potential conflicts of interest have become so firmly entrenched in the financial advice profession that unfortunately it’s difficult for an adviser to meet the definition of independence. In fact, less than 200 of Australia’s 15,000 or so financial advisers are independent. That’s around 1% of all Australian financial advisers.

So it’s not surprising that many people I meet haven’t heard about an independent financial adviser before, or how this type of adviser differs from the other 99% of financial advisers in Australia.

While I’m a strong supporter of people engaging a financial adviser to help them make informed decisions, it really is invaluable to have confidence that your adviser has made such a commitment to putting you first that they hold themselves to an additional standard with a rigorous set of guidelines to which only 1% of all Australian advisers abide by.

But finding an independent adviser can prove a challenging task. Often advisers who appear to have no ties to product or service providers are in fact licensed and incentivised through a large financial institution, and many advisers charge clients a percentage of the funds they manage for them, and take a commission for insurance recommendations they make for their clients.

Fortunately, since a change in the law in 2021, there’s now an easy way to check if a financial adviser is independent. Every financial adviser who is not independent must disclose that they lack independence in a document called their Financial Services Guide, or FSG for short. And most advisers will make this document available on their website. If it’s not on their website then, by law, if you are engaging a financial adviser they must provide their Financial Services Guide to you before they provide any advice to you.

Want to learn more about how independent financial advice may benefit you or someone you care about? Feel free to reach out for a complimentary, no-obligation phone conversation on +61 7 3521 8044 or email us at Enquiries@BrisbaneIndependent.com.au.