The Royal Commission

The Royal Commission continues to unearth disturbing examples of bad financial practice, but it’s hard to imagine anything much worse than what was revealed last month about “celebrity” financial advisor Sam Henderson. I was watching it on live stream, and was transfixed by evidence from Ms Donna McKenna, a senior public servant, who told how Sam Henderson, of Henderson Maxwell, advised her to cash out of her public service superannuation fund two years early, and use the proceeds to start a self-managed super fund. She had made it quite clear that she did not want to start a self-managed fund, and Henderson was well aware that leaving the fund early would cost her $500,000. She called the advice he gave her “risible”.

People reading or watching the Royal Commission unfold could be forgiven for thinking that the financial advice fraternity is stuffed with the worst that humanity has to offer. However, with my decades of experience in the industry and the conversations I have every day with happy clients of financial advisers, I know that nothing could be further from the truth. The majority of financial advisers do an amazing job, and their clients are happy with them.

Actively engaging the services of a great financial adviser can be life-changing – for the better! If you follow the right advice, and stay the course with the right support, undoubtedly it will more than pay its way in opportunities provided and crises averted.

Consider this example of the dangers of not seeking any financial advice at all. In a case I heard of recently, a man was diagnosed with terminal cancer, and his wife, thinking she was doing the right thing, amalgamated all his superannuation policies “to save fees”. But in doing so, she lost her husband’s $400,000 of life insurance, because the super fund which included that policy was one of the ones closed. If they had consulted an adviser before taking this catastrophic action, no doubt this loss could have been avoided.So what about getting advice? Despite the stories in the press right now, financial advisers are not all shysters and crooks. When you find a competent and compatible financial adviser, they will guide you through the tricks and pitfalls of finances to a result most people couldn’t achieve on their own.

The fact remains that good financial advice is needed more than ever – I guess the question in many people’s minds now is, “How and where can I find a good advisor?” It’s really no different to finding a good doctor or plumber.  A great start is to find somebody who has an adviser who they have a good affinity with and who works well with them for great results. If you don’t know anybody who has this kind of adviser, the world of online reviews is another suggestion. Try to see reviews about financial advisors who might fit the bill for you, or try Google reviews. Also look for advisers who hold membership of a professional body such as the FPA or AFA, and qualifications such as Certified Financial Planner.

So, the first question to ask yourself is whether you are happy with your current advisor. If you are happy that’s great: make sure you have regular contact with your adviser, and that you know exactly what fees are being charged.

If you are uncertain about your adviser, I suggest you schedule a meeting as soon as possible to discuss any concerns you have. Often, concerns relate to the performance of your investments, so remember that the more conservative you have rated yourself, the more likely it is that your investments will not perform as well long term as those with a more aggressive risk profile. But then, you are the one who has to be able to sleep at night.

If you’re not happy now, and meetings with your adviser have not changed the feeling, seek a second opinion.

What are the warning signs of a dodgy adviser? Two of the biggest red flags are the suggestion that you move your superannuation to a fund under the control of the adviser without a reasonable justification to do so (for example to attain a lower management cost, or to gain features you really need) or that you start a self-managed super fund, again without reasonable justification.

In summary, the last conclusion you should draw from the publicity surrounding the Royal Commission is not to seek financial advice.  In this complex and ever-changing world, it’s critical – now more than ever – that you embrace the right support to reach your financial goals. As always, the sooner you start, the better the outcome.