The good, the bad, and the ugly - and how to avoid being a casualty

The Australian Securities and Investments Commission's shadow-shopping of retirement advice put the spotlight on advisers who did their job well, and some who fell well short.

The Australian Securities and Investments Commission's shadow-shopping of retirement advice put the spotlight on advisers who did their job well, and some who fell well short.

The good

- One adviser explained that the client's current financial arrangements would not meet their retirement needs. He recommended strategies that would get them closer, but explained a shortfall would still remain. While the client felt less confident about their future, the adviser worked with them to set realistic goals and implement strategies to make the most of what they had.

- The adviser explored all the options available to the client within their defined benefit scheme, as well as two further options about what to do with a redundancy payment.

The bad

- One client sought advice to work out whether their finances were on track, when they could afford to retire and what their retirement income would be. While the adviser considered these topics and provided recommendations, they did not address the client's existing debt. Nor did the adviser clarify that debt was outside the scope of the advice.

- A client saw a financial adviser employed by a big bank. The client had insurance and estate-planning needs, as well as substantial looming expenses. However, these were not considered by the adviser, who focused on the lump sum required to provide the client's desired income, and on switching their super to one of the bank's funds.

The ugly

- One adviser attempted to exclude the client's cash flow, expenses, defined benefit fund and insurance within super from the scope of the advice. ASIC felt that these aspects could not legitimately be disregarded, given that the adviser was purporting to provide broad "retirement planning" advice.

- A participant sought financial advice specifically to reduce the risk in their super portfolio. However, the adviser put the majority of the client's funds into shares and property. While the investment mix was disclosed, the asset allocation was not sufficiently highlighted or explained to the client, who believed their risks had been appropriately adjusted.

- One statement of advice clearly stated that the benefit of implementing the adviser's recommendations would be "zero". Even this may have been an overestimation, as the strategy was likely to result in a loss of social-security entitlements. Further, while the statement explained how paying lower fees can lead to a higher retirement balance, it also showed the advice would leave the client tens of thousands of dollars worse off.

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