Transparency

Why transparency is so important when it comes to financial advice

One of the challenges with financial advice and financial services more generally is it’s often hard to gauge what you are signing up for.  Unlike buying a house, a car or going to a restaurant, financial advice is more a leap of faith and this is your hard earned money we are talking about. Furthermore, it could be quite some time before you know for sure if the advice you are getting is hitting the mark.

 

As when buying anything significant, you can and should do your own due diligence before getting financial advice. For example, research the history of the financial adviser and how they operate their business. Review their experience and qualifications, take a look at their website and do some reference checks. Unfortunately, the intangible nature of financial services puts clients at a real disadvantage as they often have to rely on and take at face value the information provided to them by the financial adviser. That sounds rather daunting doesn’t it and it’s why transparency is so important when it comes to financial advice.

To some extent regulations help as financial advisers are obliged to disclose prescribed information to prospective clients. In the case of Authorised Financial Advisers, they must provide a Primary Disclosure Statement before providing you with any financial advice, followed soon after by their Secondary Disclosure. Once you become a client, the information you get from your Authorised Financial Adviser is less prescribed and more principles based.

Transparency is crucial

At Saturn Advice, we believe transparency is crucial, not only when you initially engage a financial adviser but on an ongoing basis. Here are five pointers to good transparency:

  1. Your financial adviser should tell you up front how they get paid and whether there are any potential conflicts of interest in the way they are remunerated or in the services they provide. Don’t be afraid to dig deeper. If they are not working for you, who are they working for?
  2. Be clear on the advice you will be receiving from your financial adviser before you pay for any advice or service. The nature and scope of service should be agreed in writing.
  3. Unless agreed otherwise, the advice you receive should be in writing and contain sufficient information to back up any recommendations.
  4. If your financial adviser is managing investments on your behalf, they should report to you regularly. We think this should be quarterly and include the value of your investments, how they are performing, transactions that have taken place, the fees deducted and confirmation of the amounts added or withdrawn. Ideally you should have access to your portfolio information through a secure online portal.
  5. Your financial adviser should be available to meet for regular reviews to ensure your investment portfolio is still appropriate for your circumstances.
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