The introduction of the Best Interest Duty in 2013 as part of the Future of Financial Planning reforms (FoFA) stipulates that financial planners must act in the best interest of their clients. While the Best Interest Duty has had an overwhelmingly positive effect, there are still a number of financial advisers being reported by ASIC who have not been compliant, and consumers should be alert to the red flags from these rogue financial advisers.
The Hon. Bernie Ripoll of Financial Rescue, who was instrumental in the FoFA reforms says that consumers need to be aware of the warning signs identified in the following.
+ The adviser pushes a product that benefits them more than you
+ You don’t understand the advice you have been given
+ The advice has a “one size fits all” approach
+ Offers of unusually high returns
+ The advisor is not licenced
+ The advisor urges you to act quickly/attend a “free event” as part of a sale pitch
+ The advisor doesn’t disclose how and what they are paid.
+ The adviser tells you the investment is only available through them, which can result in many follow-on complications
+ The advisor pushes for unrealistic investment that is not in line with your risk preference
+ The advisor suggests liquidating your assets and/or entering debt to purchase one of their products.
Ripoll has warned “investors need to be aware of the warning signs, and if they are unsure, always get a second opinion.” To protect yourself from bad financial advice, always ensure the advisor is registered with ASIC. If they are not on the ASIC register then they are not able to legally give any financial advice, and should not be trusted.” Mr Ripoll Said.
“While there has been a positive cultural shift in the financial planning sector, there are still financial advisers out there who are not acting within the best interest obligation.” Mr Ripoll said. ASIC has a list of “companies you should not deal with”. Mr Ripoll advises investors to check this list before engaging in any financial services and avoid taking financial advice from companies on this list.