Use this mega guide on the basics of financial planning to learn how to find a planner, ensure you’re getting value for your money and decide if engaging a financial planner is right for you.
Financial planners are qualified to give you personal financial advice and can actively manage your investment portfolio(s) to create wealth and safeguard against loss.
By analysing your personal and financial circumstances, as well as your life goals, a financial planner creates an investment plan to give you the lifestyle you want now and in the future.
Financial planners are not just for the rich; everyday Australians also use financial advisory services. Of course, your goals must be realistic. Financial planners are not magicians.
What types of financial advice are available?
- Personal advice. Financial planners can provide you with personal financial advice. Personal financial advice can be for a single issue, or for more comprehensive or ongoing issues. Your financial planner will charge you a fee based on the type of advice.
- General advice. General financial advice is available on websites such as finder.com.au and is free of charge. General financial advice does not consider your personal financial circumstances.
How can a financial planner help?
A financial planner can:
- Help you identify your short term and long term financial goals
- Give recommendations about investment products relevant to your personal situation and goals
- Actively manage your investment portfolio(s) to make sure your investments are working towards your financial and personal goals
- Help you apply for important financial products such as superannuation, life insurance and income protection insurance
|Tax agent||Accountant||Financial planner|
Pocket Money podcast: What does a financial adviser actually do?
Financial planners charge a combination of upfront and ongoing fees, which are usually based on the financial planner’s level of service and the scope of work completed.
Your first meeting with a financial planner should be free of charge. Financial planners use this opportunity to find out more about you as a person, discuss how they can help you and outline the fees for their service.
Some of these fees can be claimed as a tax deduction.
Financial planning fees and charges
|State of Advice (SOA) fee|
|SOA implementation fees|
|Portfolio review and revisions|
|Annual Fee Disclosure Statement (FDS)|
Two important points about financial planning charges
- Know how much you will pay. Make sure you get your financial planning fees expressed as a dollar sum rather than a percentage whenever possible. This will help you avoid any surprises when your financial planner sends you your bill.
- SOA fee and insurance. Your financial planner may receive a commission if an insurance product is included in your SOA. Be sure to ask if there are any arrangements like this in place and whether you’ll eligible for a discount on the SOA fee.
Claiming financial planning fees as a tax deduction
Somewhat of a grey area, the fees you pay to your financial planner can only be claimed as a tax deduction if the charge is for the management of an investment that pays an assessable income.
|Tax deductible financial planning fees||Non-tax deductible financial planning fees|
Certified financial planners
Financial planners can be either qualified or certified and both qualified and certified financial planners are represented by the Financial Planning Association of Australia (FPA).
A qualified financial planner has completed the Australian Securities and Investment Commission (ASIC) RG 146 licensing course to obtain an Australian Financial Services Licence (AFSL). This can be completed online in under a couple of weeks.
A certified financial planner has gone a step further and completed education and training modules. FPA Certification is harder to get than an AFSL and certification is internationally recognised.
Did you know?
The Future of Financial Advice reforms (FOFA: July 2016) state that accountants must obtain an Australian Financial Services Licence (AFSL) to give financial advice about self-managed super funds (SMSFs).
What qualifications does a financial planner need?
As a minimum, financial planners need an AFSL and need to meet the minimum training standards set out by ASIC under Regulatory Guideline 146.
This ensures your financial planner has a level of both general knowledge and specialist knowledge in areas such as superannuation, insurance and managed investments.
Although a university degree isn’t necessary to start giving financial advice, you should look for a financial planner who also has a diploma, advanced diploma or degree in a related field such as accounting, finance, economics or, ideally, financially planning.
Full and limited AFSLs
Holders of a limited AFSL can give financial advice on SMSFs and superannuation as well as provide product advice on superannuation products, securities, general insurance, life risk insurance and basic deposit products. Full AFSL holders have no restrictions on the scope of advice they can offer.
How are financial planners regulated?
Financial planning is regulated by industry bodies such as the FPA and ASIC.
The financial planners register
The ASIC MoneySmart website has a register of financial planners. False or misleading entries on the register can lead to fines of almost $80,000 and possible jail sentences. The register works with the public. If you find a financial planner who is not listed on the register, you’re encouraged to report to the planner to ASIC so the watchdog can take the appropriate action.
Financial planning professional bodies such as the FPA also regulate members through codes of conduct and client review services. You can read more about this below.
Banks, financial institutions, law firms, advisory businesses and independent operators can all offer professional financial advice. Here are some options.
- The Financial Planning Association of Australia (FPA). FPA's Find a Planner service lets you search for certified financial planners in your area. Top level members of the FPA are certified professionals with years of experience and professional qualifications.
- Adviser Ratings. Adviser Ratings is an independent service where all registered financial advisers in Australia can be found. You can use the tool to check up on client testimonials for prospective financial planners, and filter your search by a range of factors including location, gender and years of experience.
Check the financial planners register
You can use the ASIC financial planner register to double check a prospective planner’s qualifications, experience and work history.
The financial planners register gives you information on:
- The financial planner’s areas of expertise
- Their industry body membership
- Their AFSL
- Whether the planner has had complaints or received disciplinary action in the past
Get a copy of the financial planner’s Financial Services Guide (FSG)
Once you have a short list of financial planners, you can investigate the services offered by each by requesting a copy of the planner’s FSG. This guide outlines fees, services and whether the planner gets paid commissions or is associated with any financial institutions such as banks.
Have a face-to-face meeting
When you’re ready for a meeting, you can usually get a consultation free of charge. You can use this opportunity to review the planner’s FSG and to discuss the scope of planning and advice services.
|Questions to ask your financial planner||Questions your financial planner should ask you|
A financial planner is qualified to provide advice about debt consolidation and they can help if debt consolidation is part of your overall investment strategy. A financial planner can recommend strategies and financial products for debt consolidation such as debt consolidation loans and credit cards.
This type of financial advice can be included in a financial planner’s ongoing fees or in service costs and you can assess the value of this advice when your financial planner gives you your FDS. If you’ve been unable to pay down debt and you’ve been charged for the financial advice, you may want to consider the ongoing value of this advice.
In many cases, general financial advice can provide some good tips on how to consolidate debt. A financial counsellor can also provide debt consolidation advice.
Financial planning can help you realise your goals and the changing nature of the markets and your personal circumstances can make an ongoing relationship with a financial planner essential to get the greatest benefit.
You can assess the value of your financial planner when you’re issued with your FDS. This document lists the services provided and how much you paid for the work completed. For example, if you’re paying for regular advice, find out what the financial planner considers to be regular contact. Similarly, if you’re paying for advice that can be tangibly measured, such as debt consolidation advice, you can make an assessment of the worth of this service when it’s time for your annual review.
While financial planners can help you navigate the world of financial markets, this information is becoming increasingly accessible to the public. There are even robo advice services that act as a halfway point between doing it yourself and using a financial planner.
You can now get the benefits of a financial planner without the high fees. Robo advice platforms such as Six Park and Macquarie Bank Owners Advisory give you professional investment advice for a cheaper price than a financial planning service.
Robo advice services provide investment advice based on your risk appetite. These services can help you invest in a diversified portfolio to help realise gains over three, five and twenty years.
The main difference is the scope of service. A financial planner is qualified to provide advice on financial products such as insurance as well as cash and derivative assets such as ETFs. A financial planner should manage your investment portfolio on an active basis too. Robo advice is a passive form of management, and some services don’t manage your money at all.
That being said, robo advice is a viable alternative to financial planning services for DIY investors and SMSF trusts.
Q. Is there a difference between a financial planner and a financial advisor?
A. No. Financial planners and financial advisors are the same thing. A certified financial planner (CFP) meets education, work experience and ongoing training requirements and adheres to a code of conduct.
Q. Should I use a financial planner not listed on the ASIC financial planners register?
A. No. Every professional listed on the financial planners register holds an AFS licence. This is a key requirement for financial planners.
Q. How do I lodge a complaint against a financial planner?
A. The first step is always to try and talk with the financial planner. If the problem can’t be resolved face-to-face, the planner should have a dispute resolution process. This information will be provided in the FSG. Financial planners have up to 45 days to respond to your dispute, though you should get a response much quicker than this. The next step is to use an external dispute resolution service. Ask the financial planner which external scheme you should report to, or make a complaint with the financial planner’s professional association.
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