According to The Australian Financial Review: "Australians are expected to seek more financial advice in 2014 after years of shunning planners, thanks largely to rapidly improving investor confidence and an appetite for riskier assets."
Financial planners are sometimes perceived as only pursuing their own agenda – and rightly so. Too many financial planners have given the industry a bad rap by masquerading their own agenda underneath advice to clients.
Although by comparison to other countries, Australian financial advice is well regulated there are still a number of problems I have with how some firms conduct themselves. First and foremost the different products offered by a planner are rarely controlled by them. They are given a list of products they can offer clients with exceptions to the rule rarely granted.
That is because advisors are taught to know your client and know your product, although this sounds promising it can sometimes restrict an array of alternative products which may suit a particular client better. Which brings me to the most important concern I have with the system.
When designing a statement of advice, advisors must show how a strategy or financial product will benefit a client. The advice must provide a better proposed outcome than what the client is currently receiving. I believe it shouldn't be better, it should be the best.
An alternative
Benjamin Frankin once said: "An investment in knowledge pays the best interest." It's something you can truly take on board before receiving financial advice. There are so many sources for free financial and investing advice that enable you to receive your product without bias. There are also comparison sites.
Information on insurance products, budgeting and investing is available online for little or no cost. When it comes to investing, you can choose to buy and sell your own shares (which is the cheapest and possibly the most effective way to reach your financial freedom), or you can use the services of an investment management company such as Perpetual (ASX: PPT), IOOF Holdings (ASX: IFL) or Platinum (ASX: PTM), which incurs a management fee.
Foolish takeaway
As a qualified financial planner, I've met many who are honest and trustworthy and will do the best they can to set you up for financial success. However as an investor and individual who understands financial markets, I know the best way to reach your financial goals is to take control of your own money. It might sound corny but learning how to invest, budget, make tax effective strategies and pick insurance products could be the cheapest and best investment you'll ever make.
If you do decide to see a financial advisor in 2014, ask questions and don't be afraid to push for products that you believe are better suited to your situation. Shop around and go to boutique planners and those which offer you a truly personalised service. If you see an advisor at your bank, read the Product Disclosure Statement for the products recommended by your planner.
