In this guide
We all make personal financial decisions every day, whether it’s about how much we can spend, the mortgage we select, or how much we put towards our retirement nest egg.
Despite the important role of personal finance, less than half of all Aussies (48%) rate their overall knowledge of financial matters as being good or better, and just one in ten (11%) rate their knowledge as being very good.
If we don’t rate our financial knowledge as being very good, it’s surprising more of us don’t seek help from an expert like a professional financial adviser.
Asking for assistance can actually reduce the anxiety most of us feel when it comes to our finances. As the AMP 2022 Financial Wellness report noted: “There’s plenty of research showing that people who draw on expert advice – from financial planners, accountants, super funds and more – are less financially stressed and make better decisions.”
In fact, a 2022 report by research consultancy MYMAVINS found people who received advice are “significantly more likely to feel financially secure than those who are unadvised (85% vs 62%), and are more likely to feel very or completely satisfied with their current level of wealth (35% vs 18%).”
Understanding the different types of financial advice
While organising a chat with a financial adviser makes sense, if you haven’t seen one before the process can seem a little daunting.
Read about what happens when you meet a financial adviser.
It’s good to know there are strict rules covering the documents and information your adviser must provide and that they must be working in your best interests.
Financial advice is divided into two main categories:
1. General advice
This type of financial advice is quite broad in nature. It doesn’t take into account your personal objectives, personal financial situation or needs.
The adviser can tell you about the features of a financial product (such as investments, super or insurance), but not about whether it’s suitable for your particular financial situation.
If an adviser is providing general advice, they don’t need to provide you with a Statement of Advice (SOA) and there is normally no fee payable.
Need to know
Under Part 7.7 of the Corporations Act, retail clients must receive a general advice warning when receiving general advice.
You must be warned the advice has been prepared without taking into account your personal objectives, financial situation or needs. If the advice relates to buying a financial product, you should carefully read the product’s PDS before making a decision.
2. Personal advice
If you want financial advice that considers your personal goals, needs and financial circumstances, you can choose either:
- Limited or single-issue advice: Covers a particular issue and doesn’t take into account your full financial situation.
- Comprehensive or ‘holistic’ advice: Covers your overall financial situation through a comprehensive financial plan.
When an adviser provides personal advice, they must provide you with a Statement of Advice (SOA), Financial Services Guide (FSG) and Product Disclosure Statement (PDS).
