It can be hard to tell whether an adviser has done a good job. This often isn’t clear until years after the advice has been given. If you’re unsure, you have the right to ask another adviser for a second opinion. This will usually involve a fee.
There are certain things you should expect from all advisers, regardless of the type of advice you’re receiving. If your adviser is suggesting you change from one product to another, providing you with a written financial plan or giving you personal advice about particular investment products, you’d expect more detail.
Make sure you find out if you’re a retail or wholesale investor as this affects the level of protections you have if things go wrong.
What to expect from all advisers
All advisers providing personal advice should provide you with their disclosure document(s). The disclosure document(s) provide useful information about the adviser. When providing personal advice we would also expect the adviser to:
- talk to you about your personal situation so they understand your circumstances and goals
- talk through their recommendations, explaining why they think these are right for you
- explain how they’re paid
- explain how their complaints process works and tell you who their dispute resolution service provider is.
| TIP: All advisers have a legal responsibility to act with care, diligence and skill and AFAs must place your interests first and act with integrity. If you don’t feel this is happening, you’re entitled to ask why they have chosen the investments they have. |
Any adviser who recommends you change from one product to another product must:
- Provide a clear and balanced comparison of your existing and new products. They must explain if the new product is suitable and if it has any exclusions or limitations. For example, if you’re changing your life or health insurance, they should tell you if there is any reduction in cover (or no cover) for pre-existing conditions that are covered under your existing insurance. See our life insurance advice page for things to look out for before you change your insurance.
- If they can’t provide a specific comparison (for example, if they’re not qualified to comment on other provider’s products), ask them to explain this. They should also explain the types of risks involved with changing products so you can investigate this further yourself or get a different opinion if you wish.
If an adviser provides you with a written financial plan, as well as providing personal information about you and your goal, you could expect the plan to record:
- a clearly defined scope of service so you know exactly what advice is and isn’t being provided - see working with an investment adviser
- information about the advantages and disadvantages of each option suggested.
If an adviser is providing personal advice and has suggested particular investment products, they should provide you with sufficient information in writing to enable you to make an informed decision. This could generally include:
- information about why these are right for you. For example, do they meet your personal goals and tolerance for risk?
- what returns you can expect and how likely these are to go up and down over time
- information about appropriate benchmarks, to compare how your investment portfolio is performing against other similar portfolios in the market
- what you'll pay and how to get your money out
- details of the information you’ll receive about your investments.
They must also give you the specific product disclosure information for each product you are using.
We expect advisers to be able to explain everything they give you in plain English and to be happy to answer as many questions as you have.
| TIP: Unless you’ve specifically asked for advice on only one product, generally an investment adviser would recommend a portfolio of investments. These are made up of a mix of cash, bonds, property and shares. The mix should match your investor type. Find out more on Sorted’s investor kickstarter. |
Am I a retail or wholesale investor?
Generally, you’ll be a retail investor unless you meet certain criteria, for example, you’re a family trust or you have a large sum of money. In this case you could automatically be considered a ‘wholesale investor’.
Make sure your adviser explains very clearly what a wholesale investor is and what the implications are of being a one. Wholesale investors have less protection if things go wrong. We expect advisers will only recommend you become a wholesale investor if you have significant experience in investing and investment markets.
You can opt out of being a wholesale investor if you wish.
Learn more about:
Working with an investment adviser
