Research from the Association of Financial Advisers and CoreData during the Banking Royal Commission revealed more than 71 per cent of people who've never received financial advice would consider it ... so what's stopping them?
47 per cent say they can manage their own finances. A third say it's too expensive. And just 13 per cent say financial advisers are untrustworthy.
Philip Kewin, the CEO of the Association for Financial Advisers, says financial planners can play a critical role in building wealth:"It's interesting because 49 per cent of people don't seek financial advice because they feel they can do it themselves. What they don't know is the financial and emotional well being they can achieve out of financial advice." And on the distrust? "There are 25,000 registered financial advisers out there, there are a handful of instances of poor advice. Now a handful is too many because we are talking about people's well being, financial well being, but the majority of advisers are good, hardworking professionals delivering a great outcome for their clients." Mr Kewin said.
The Banking Royal Commission shone a spotlight on financial advice, with some larger players singled out for offering fees for no service.
Ten recommendations were made which affect the financial advice sector including the annual disclosure of fees and a single disciplinary body, responsible for punishing bad advisers.
Educational standards imposed by ASIC, the Australian Securities and Investments Commission, are already being phased in.
For those seeking financial advice, Mr Kewin says referrals are often the best way to find a financial adviser, with those registered listed on the MoneySmart website: "When you meet an adviser for the first time, they need to give you a financial services guide that tells you who they are, who they represent, how they're paid, what sort of products they can recommend, what they're authorised to give recommendations on and that identifies upfront their bona fides. If you have a particular preference for dealing with an independent advisor versus one that's aligned to an institution, you can establish that upfront; it has to be declared."
Erin Turner, from consumer group CHOICE, says the first question anyone should ask a financial adviser is - how are you being paid? "If they're paid by anyone other than you, they're not working exclusively for you and we've seen time and time again when that happens they're more likely to recommend a product that isn't in your interests and in some cases have left people with lost retirements, lost thousands of dollars and in serious harm."
The AFA's Philip Kewin says advisers can be paid in a couple of ways:"Advisers can be paid through a fee, or a commission, or a combination of both. The important thing about fees and financial advisers is that all fees have to be disclosed upfront and agreed to, by the client and adviser, so the client can chose to pay in a way that suits them. Generally you would be looking at a couple of thousand for an initial plan, but it does depend on the complexity of the plan."
You can see an adviser for one-off help - for a particular issue - that'll cost you by the hour. But by not considering your entire financial situation it can be hard for an adviser to make recommendations that are in your best interest.
CHOICE's Erin Turner says there are other alternatives though - like financial counsellors:"there are, for example, financial counselling options. These are free, fair independent advisers. They can help you if you're in debt, they can help you figure out what's happening with your credit card, and they can also negotiate with energy providers or utility providers to get you better outcomes."
Financial coaches are also increasing in popularity, says David Rankin from Sort My Wealth: "What I do is I look at somebody's income, outgoings and aspirations in detail and I draw up the perfect budget for them. When I draw up a budget for somebody i'm looking for it to be realistic."
Unlike financial advisers, they don't have to have an Australian Financial Services Licence because they don't sell tailored financial advice or products.
