The right financial advice can help you achieve your financial goals. However, it's important to know what to do if something goes wrong.
Signs you may have a problem
You may have problems with a financial adviser if they:
- seem to be pushing one solution, regardless of your needs (for example, an SMSF or borrowing to invest)
- pressure you to sign documents that you haven’t read or don’t understand
- give you advice that doesn’t fit with your goals or risk tolerance
- make you feel intimidated or uncomfortable if you ask questions
- are not upfront about how they make their money and the costs of the advice
- leave you in a worse financial position than before you received the advice
- charge you for advice that they never provide
Anyone who gives financial advice must have an Australian financial services (AFS) licence or work for a company that has a licence.
If you've lost money because your adviser acted illegally or gave you advice that was not suitable, you may get a refund.
What to do if you have a problem
If you're unhappy with financial advice you've received or fees you've paid, there are steps you can take.
Act quickly if the advice doesn't look right, or if you've paid for services that you didn't receive.
Talk to your adviser
The first step is to talk to your adviser. If it's about fees, ask them to explain their fees and what the fees are for. If you think the fees are too high, ask if they're willing to reduce them.
See our tips for working with a financial adviser.
Make a complaint
Internal dispute resolution
If you're not happy with your adviser's response, you can make a complaint through internal dispute resolution. Their Financial Services Guide tells you how to do this. It should be on their website, or you can ask them for a copy.
They must acknowledge the dispute within 14 days. They must respond to the dispute within 45 days. For more information, see internal dispute resolution tips from the Australian Financial Complaints Authority (AFCA).
Your adviser should work with you to sort out the problem.
Australian Financial Complaints Authority (AFCA)
If you're not satisfied with how your adviser has handled your complaint, you can contact AFCA.
AFCA is a free, independent service that helps resolve complaints from consumers and small businesses about financial service providers.
Industry association
You should also complain to the adviser's industry association or professional body. To find out which one they belong to, see our financial advisers register.
Police and ASIC
If you suspect fraud or dishonesty, you should also contact your local police and report the misconduct to ASIC. An example would be your financial adviser has spent your money on their own expenses.
If your adviser is banned
ASIC can ban a financial adviser if they have done the wrong thing, such as:
- failing to act in the best interests of their client
- charging for services they have not provided
- providing false or misleading information
- giving advice that is not appropriate
- not being honest
Once an adviser is banned, they can no longer give you advice. They should contact you straight away to explain what will happen with your portfolio. They can allocate another adviser or you can choose someone else in the company. You can choose if you want to continue or end the relationship.
Ending your relationship
If you end your relationship with your adviser, make sure you:
- Let them know in writing, and keep a copy for your records.
- Cancel any authorities you've given them, for example, transaction authorities or access to bank accounts.
- Review the advice you've received from them. You can ask your new adviser to do this, using your Statement of Advice (SOA).
- Cancel the fees (or reallocate them to your new adviser).
If you decide to transfer to a new adviser, see choosing a financial adviser for what to look for.
FAQs
Signs you may have a problem
How to tell if your financial advisor is bad? ›
7 Signs Your Financial Advisor Is Terrible
- They are a part-time fiduciary.
- They get money from multiple sources.
- They charge excessive fees.
- They claim exclusivity.
- They don't have a customized plan.
- You always have to call them.
- They ignore you or your spouse.
Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?
What problems do financial advisors have? ›
Navigating the Biggest Problems Financial Advisors Face
- Problem 1: Regulatory Compliance.
- Problem 2: Client Acquisition and Retention.
- Problem 3: Technological Adaptation.
- Problem 4: Market Volatility.
- Problem 5: Trust and Credibility.
- Problem 6: Maintaining a Competitive Edge.
- Problem 7: Work-Life Balance and Burnout.
In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee.
How to tell if your financial advisor is ripping you off? ›
There are several warning signs that your financial advisor may be ripping you off, including high fees, hidden costs, and a lack of transparency. If you have concerns, it's important to speak up and ask questions.
When should you leave a financial advisor? ›
If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find one willing to go the extra mile to work with you, serve your best interests and to keep you as a client.
How safe is your money with a financial advisor? ›
The Bottom Line
There is always going to be inherent risk in trusting your money with another person. Financial advisors are meant to take care of your money but it doesn't mean each and everyone will always have your best interest at heart.
Can financial advisors lose your money? ›
Most reputable financial advisors never take possession of your money. Giving them direct access makes it easy for them to steal funds. Avoid doing that unless you're 100% certain that you can trust the person you're working with.
What financial advisors don t tell you? ›
10 Things Your Financial Advisor Should Not Tell You
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
Significant loss threats include advisor death or disability, key person loss, an unexpected disaster (natural or otherwise), lawsuits, and failure to plan for business succession.
Can financial advisors get in trouble? ›
One in 13 financial advisers have a misconduct-related disclosure on their record. Misconduct is not frivolous and results in substantial costs; the median settlement paid to consumers is $40,000 and the mean is $550,000. These settlements have cost the financial industry almost half a billion dollars per year.
Are financial advisors really worth it? ›
A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.
How do you know if you have a bad financial advisor? ›
Here are seven warning signs that it's time to choose a new financial advisor.
- They're unresponsive. ...
- They don't check in with you. ...
- They're inattentive. ...
- They have high fees. ...
- They push you toward certain investments. ...
- You're unhappy with your portfolio's performance. ...
- They don't have a good relationship with you. ...
- Bottom line.
Contact your advisor, thank them for their service, and ask for transfer-out paperwork- I understand you may not want to talk to the advisor you are leaving. Breaking-up isn't exactly fun. In my opinion, letting your advisor know you are leaving them is the right thing to do. A call will do.
How difficult is it to change financial advisor? ›
Legally, switching financial advisors is pretty straightforward: Sign an agreement with your new firm, and notify your old advisor. However, there may be some financial ramifications. Check your old advisor's contract to see if there is a termination fee, which you'll need to pay.
How do you know if a financial advisor is any good? ›
All financial advisers should be registered with the FCA. This means they meet the right standards and you get more protection if you're not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong.
How do I know when to change my financial advisor? ›
Common signs that indicate you should switch advisors include a lack of communication, misalignment with your financial goals, poor performance, and a lack of personalized advice.
How often do financial advisors fail? ›
80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.
What if a financial advisor loses your money? ›
In theory, if you have lost money because your broker (or any financial institution) gave you bad advice, mismanaged your investments, misled you, or took other unlawful or unethical actions, you can sue for damages. If these breaches of duty are provable, the "merits of the case" are strong, as a lawyer would say.
