Wednesday's Australian Financial Review Portfolio Liftout was badged as "A Guide to Good Advice".  It provided some interesting reading of which I want to comment on two articles over the next few days of blogs.

The first looked at 10 questions to ask when choosing a financial planner.  I thought it would be a good exercise for us to answer these questions and be right up front with any potential or even current clients.  So here goes.

1.                   Can I see your Financial Services Guide?

The article highlights that providing an FSG is a legal requirement.

Our FSG is available to clients during their first meeting together with us.  If we are unable to meet face to face we will provide a copy with our first mail out of information.

2.         How long have you been a financial planner?

The article suggests the more experience the better.

Our principal financial planner, Scott Francis has been working in the industry for over 5 years.  I have been working in the industry for 1 ½ years and worked with Scott in planning the business.  We meet together with clients where possible and always work together on each client's strategy to ensure we are providing the most applicable guidance and advice.

3.         What do you specialise in?

The article suggests that you look for a financial planner that is suited to your particular circumstances.

We cover all areas of the financial planning process from wealth accumulators to retirees.  From initial financial planning strategy to the placement and monitoring of investments.  One area that we do refer clients to other sources is with regards personal insurances.  We see this as a very specialised area.  However we continue to work closely with our preferred insurance advisor to make sure clients are being well looked after.

4.         What kinds of clients do you mostly see?

The article suggests that you should find out about the types of people a planner advises and that they are in tune with your lifestyle.

We have a wide range of clients ranging from university students to professionals, people in their twenties to people well into retirement, people living in all states and territories (except the Northern Territory but we want to rectify this!).  We have clients that require planning for wealth accumulation, tax, income distribution, retirement, estate and social security needs.

5.         How do you charge for your services?

The article suggests that a planner should be able to provide an estimate of the cost of advice and options for paying.  It is a legal requirement to let a client know all the costs and sources of potential income.

We are upfront with the potential costs likely to be incurred by clients.  Our website contains a clear description of our fee for service model - Portfolio Management Service & Fees.

Some key points:

-          any initial meeting is free of cost - this gives potential clients a chance to see whether we are the planners they want to engage with in the future without costing them a cent,

-          we do not accept commissions from financial products or any other provider.  There is one cash account that we use for clients that passes on a commission.  We rebate this in full back to clients every quarter, even if the amount is less than $1.  It is extremely important to us that we are independent from any actual or potential bias,

-          the maximum annual cost for any client is $4,400 (including GST), the equivalent of 20 hours of work.

-          we base our fees on funds under advice, the maximum fee that we charge is 0.55% of funds under management.  This percentage fee reduces to 0.2% for every dollar over $500,000 on which we manage for clients.

-          There are definitely no entry or exit fees involved with any strategy we recommend to clients apart from the normal brokerage / transaction costs involved with buying and selling assets

6.         Will I receive written advice?

The article confirms that by law a financial planner must provide a written statement of advice if personal financial advice has been given.

We provide such Statements of Advice (SOAs)

7.         How often will you review my advice and what will it cost?

The article suggests that every plan needs to be reviewed.

There are three main levels of review that we perform for clients:

LEVEL 1:  Regular portfolio reviews - this includes:

• A comprehensive face-to-face or conference call review of your entire financial situation at the end of each year.
• Individualised portfolio reviews throughout the year

These portfolio reviews are generally about keeping you on track, and checking your progress over time.  For instance we will be complete a review based on income by August after the major income payments have been received in portfolios.

LEVEL 2:  Contact from time to time - we recognise that financial questions pop up all through the year, and you are always free to get in touch to discuss this.  There is no extra cost involved with this contact.

LEVEL 3:  Portfolio Maintenance - we regularly review and monitor your portfolio, and take responsibility for administration issues such as cash transfers, asset allocation, pension payments and regular investments.  Not just every 3 or 6 months but as issues arise.

8.         How will any issues with the planner's strategy be resolved?

The article suggests that you should be asking your planner at the beginning of the relationship what happens if you choose not to follow their advice and what happens when you want to terminate.

We generally do not charge initial up front planning fees as we see this as a possible impediment for clients should they wish to exit our service at a later date.  i.e. sometimes when you pay for something up front you feel like you have to get your money's worth.  It also means that there is no initial cost for providing the advice so if a client does not want to follow through there is no cost.

9.         Who authorises you to give advice and are you licensed?

The article suggests that you should check who owns the financial planning business as this may influence the advice that they can or do give.  For instance, financial planning firms owned by major financial institutions will be more likely to recommend the products of this institution, also known as ownership bias.

Our business is privately owned by Scott Francis and myself.  We have no ownership biases.  Our business is licensed through FYG Planners, a group of 20 or so like minded financial planning practices.  Scott is an authorised representative of FYG (No. 283723) and FYG is a registered Australian Financial Services Licensee (No. 224543) I am also in the process of registering to become an authorized representative of FYG.

10.       How does the planner keep up to date with everything?

The article suggests that it is important to hear how a planner keeps abreast of issues in the industry.

Both Scott Francis and I are tertiary trained.  Scott has a Masters of Financial Planning, Masters of Commerce and MBA and is studying towards a Phd at the University of Queensland.  I have a Masters of Financial Planning and Bachelor of Commerce and plan to undertake further studies in Finance in the near future.

We both undertake regular professional development through attending seminars, completing professional development modules offered by Kaplan and keeping abreast of media.  We convey this knowledge to clients through regular contact including research notes and publication of our Quarterly Directions Newsletter.

I hope this provides a clear response to the 10 suggested questions outlined by the AFR article.  If you would like to discuss any point in more detail please be in contact.

Regards,

Scott Keefer