Money

Personal and general financial advice: what’s the difference?

Personal financial advice requires an upfront fee in Australia, but general financial advice doesn't.

Understanding the distinction between 'personal financial advice' and 'general financial advice' is worth knowing, especially if you want guidance to set up a financially secure retirement.

By Alex Brooks

Financial advice is a strange beast in Australia.

There’s something called ‘personal financial advice’ - which you often need to pay for - and ‘general financial advice’, which you can usually source for free or at low cost.

There’s lots of rules, regulations and reforms coming about financial advice in Australia, too.

Finding quality financial advice to prepare the 3.6 million Australians to retire in the next decade is surprisingly difficult.

There are plenty of fin-fluencers peddling their latest hot tips and advice on social media and lots of different articles online, but if you want a qualified and licenced financial adviser to explain exactly what opportunities you have to maximise your investments, then you probably need to pay upfront. This article explains why.

What is the difference between personal and general advice?

General or personal financial advice can help you reach your financial goals. 

Personal advice is specific to your needs and tailored to your spending, income and investments.

General financial advice does not consider your personal circumstances but can help you narrow down your financial options. It usually won’t tell you how to make the best financial decision for your personal situation, though.

Factual information about financial products and investments sourced from websites like Citro, MoneySmart or banks and superannuation funds. This type of information can also help you narrow down your financial options and decisions. 

For example, the information in Citro’s Calculating Super guide helps you navigate the different superannuation and retirement calculators available online so you can tailor the information to your specific needs and goals - but it won’t tell you which superannuation or retirement calculator to use.

Benefits of personal financial advice

Most of us have a general financial goal to be ‘comfortable’ but only personal financial advice can answer detailed questions such as:

  • Should you take out an account-based pension or an annuity to get income certainty in retirement? 
  • What sort of money should you hold outside superannuation?
  • How should you best structure your finances and any financial gifts to your children or grandchildren to qualify for the Age Pension if we need it?
  • Are you better to pay off the mortgage first or contribute more to your superannuation?

Personal financial advice can help you untangle your spending needs while also showing you how to maximise the money you have available inside and outside of superannuation to support your lifestyle, travel and health needs in the future.

And there lies the rub: right now, the people who could benefit from personal financial advice don’t usually want to pay upfront to get it.

Personal financial advice: what you should get if you pay

Finding a good personal financial adviser is like finding a good physiotherapist or doctor - what’s right for one person might not be right for another.

When you meet with a financial adviser for personalised financial advice, they usually need to:

1. Have an Australian Financial Services licence

2. Have educational qualifications in their field

3. Provide you with specific documentation, known as a Statement of Advice (SOA)

4. Disclose their fees upfront.

A good personal financial adviser can take you through a step-by-step approach and help you ‘diagnose’ the best way to meet your financial goals. A financial adviser should do things like:

  • Ask questions to understand your current finances and goals. They may also ask about risk that you’re comfortable with.
  • They should explain the fees and costs of their services, and shouldn’t try to lock you into any specific financial product until they’ve developed an advice plan for you.
  • Personalised advice can help you clarify what your investment or financial objectives are, and what you want to achieve over the short, medium and long term.
  • Identify and agree on the scope of advice you need. This will depend on your goals, lifestage and complexity of your current financial situation.
  • Eventually present you with a Statement of Advice (SOA). This is your recommended financial plan. All the recommendations for structuring your finances and investment options should be detailed in this document. 

Working with a personal financial adviser should be an opportunity for you to discuss their recommendations and clarify what everything really means. You are still the person in control of deciding which investments or financial products and brands you will use.

Your personal financial adviser will also help take care of all the paperwork to implement the new strategies or products you’ve decided on.

Seek out quality general advice and factual information

General financial advice is different to sourcing general or factual information that is relevant to your financial needs. 

General financial information can give you useful facts about financial products. Some superannuation funds provide low-cost or free general financial advice or regularly hold seminars to help you understand more. Examples of factual financial information may include descriptions of:

  • The basic features of a superannuation account and how it turns into an income stream in retirement
  • How an annuity product works
  • The income and assets test to qualify for the Age Pension
  • How transition-to-retirement pensions work as part of your superannuation planning

A licence isn’t needed to provide factual or general information.
Personal financial advice isn’t just for complex situations; it can include rearranging your budget, making informed decisions about saving and investing, or considering your insurance needs.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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