Who are financial advisers and investment managers, and what do they do?

Financial advisers are qualified professionals who help people manage their financial affairs and work towards their long-term financial and lifestyle goals. They must hold an Australian financial services licence to do this.

Although their activities can occasionally overlap with financial advisers on some financial matters, other professionals such as accountants, mortgage brokers, real estate agents and solicitors are not licensed financial advisers. 

Engaging a financial adviser is like hiring a personal fitness trainer if you want to live a healthier life and achieve certain fitness goals. Sure, you can try to do this on your own – say by joining a gym and going running a couple of times a week. You’ll probably feel better, but it will all be a bit haphazard – you risk overdoing the running and getting injured, or might lose motivation along the way and give up.

By contrast, a professional fitness trainer will take the time upfront to understand what you’re trying to achieve – whether to lose weight, build muscle strength, or run a marathon in two years’ time. They’ll create a tailored training plan for you, which they’ll adjust along the way depending on your progress. They’ll be someone you can bounce ideas off or turn to for a boost when your motivation’s flagging.

Hiring a financial adviser as a partner in achieving your financial and lifestyle goals can be one of the best decisions you’ll ever make. 

A good financial adviser will get to know you and work closely with you to develop a tailored strategy, based on your needs and goals. They’ll help you set clear financial and lifestyle goals as your circumstances change over time. And they’ll help you review those goals or your approach to them so you stay on track.

A financial adviser is qualified to give personal advice on most financial products. 

A financial adviser may be able to offer advice on:

• budgeting
• investing
• super
• retirement planning
• estate planning
• insurance
• tax.

General financial advice doesn't consider your personal circumstances or goals, or how it might affect you personally. For example, someone who offers general financial advice can tell you how different types of investments work. But they can’t tell you which ones suit your goals or current budget.

Personal financial advice is the type of advice you receive from a financial adviser. It will take into account your financial situation and goals, and what’s in your best interests. It can be given for a single, one-off issue. Or it can be more detailed and ongoing – such as developing a financial plan to meet your life goals, and monitoring your progress towards them.

Financial advisers don't usually charge for the first meeting. During this meeting they should give you their Financial Services Guide (FSG) which sets out their fees, services and how they handle complaints. Make sure you understand all the costs of the services you want before you go ahead.

A financial adviser’s fees will vary, depending on the adviser and the type of advice you’re after. But as a guide, in 2022, the average cost of a financial plan was $3,300 while ongoing advice cost about $4,300 a year.

Your adviser can either charge fixed fees or percentage-based fees or a combination of the two. The only product or service they can earn a commission on is life insurance you buy through them.

An adviser can charge a fixed fee for a Statement of Advice (SOA) or putting your financial plan into action, such as buying investments. You might also pay a fixed fee for ongoing financial advice, administration costs of your investments, or one-off questions about things that aren’t part of your financial plan.

Advisers can also charge a percentage-based fee on the performance of your investments, or a percentage of the value of your portfolio’s assets. 

An investment manager is a specialist who:

• creates and implements an investment strategy for their clients
• manages their investment portfolios on an ongoing basis
• is focused solely on investments, rather than taking a holistic view of your finances.

An investment manager should design your portfolio with your needs and goals in mind. They can develop an investment strategy for you and arrange your portfolio across different asset types. They can even make investments on your behalf if you give them permission to do so.

If you have the money and know what it will be used for and when, an investment manager can help choose a product that will help you maximise returns within your investment window.

If you’re less clear about the money’s final destination, then a financial adviser can talk you through your options and, if you choose, help you develop a financial plan to guide future financial decisions.