There’s been a lot of negative talk in the media about financial advisers. In truth, I don’t deny that there are some decent advisers out there. However, as with any field, there are bound to be cowboys, so be sure to go to one who you’ve definitely seen does a good job.
One major thing to beware of is the types of fees your adviser might charge you. In addition to your fee for the Statement of Advice (SOA), which is the fact document with the recommendations that you pay for – you need to beware of the types of fees they charge in your super and investments.
It’s all well and good that you might have had your super in five places, and the adviser rolls it over for you into just one and you save on fees. That’s likely true. Just beware that despite recent Future of Financial Advice (FOFA) legislation, advisers can charge you on your returns.
Advisers, in addition to the fee you pay them for your SOA, can actually charge you fees on top of that from within your investments. For example, you can be charged a dollar or percentage fee, which can be called an ‘Adviser Service Fee’.
Note that these were previously mostly included into the costs in the past and paid for by the funds themselves, so these costs were hidden. Still, the adviser can slap on a $2000.00 (or however much they like) annual fee, plus a 1% fee on top of that. Or they can just do the 1%. This mightn’t seem like a lot, but if you’re in a conservative fund that earns 3 or 4% per year, then you’re taking away a quarter or more of your return. This means that for all of that effort, you’d be getting a rate similar to what term deposits are at the moment (which is currently in the 2-3% zone, depending on the amount).
As always, beware of what you sign. Read the Product Disclosure Statement (PDS). Never be pressured by your adviser about returns in your super or investments, because chances are they could be trying to pressure you into getting extra funds. They can skim your investments this way for many years, even after they’ve stopped being your adviser, depending on the administrative strength of your chosen managed or super fund.
Finally, remember – if it sounds too good to be true, it most likely is. Get a second opinion about the fees from someone else – be it another adviser. Good luck and I hope that you don’t pay for anything you shouldn’t be paying for.