Good financial advice can set you up for a comfortable working life and retirement, along with taking the stress out of money management.

Bad financial advice, however, as seen with the Commonwealth Bank financial planning scandal, has the potential to make your hard-earned savings and superannuation disappear.

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The New Daily looks at the things every financial services client needs to know to help safeguard against questionable and confusing financial advice.

Be aware of asset-based fees

Independent Financial Advisers Association of Australia director Susannah Kulincevic warns that some advisers charge asset-based fees on certain products and investments.

The fee, which is usually around 1 per cent, is paid to your adviser when you invest in a certain product. The bigger the investment, the higher the fee.

“It’s a commission by another name. It’s not a healthy thing because it might not be in your best interests to obtain an investment of that particular size,” Ms Kulincevic says.

Ms Kulincevic says you can protect yourself against advice that may be asset-based by checking your adviser’s financial services guide to see exactly how they are paid.

Fraud warnings

The Australia Securities and Investments Commission warns against certain behaviour that may be fraudulent on their MoneySmart website.

This may include when a financial planner asks for power of attorney or wants you to sign a blank document.

“Don’t give your adviser power of attorney. Reputable advisers won’t ask you to do this,” ASIC advises.

“Never write cheques payable to your adviser if the money will be used for investments. Make the cheque payable to the product provider instead.”

“Even if you have a trusted relationship with an adviser, it doesn’t mean you should give them control over your money.”

Keep notes to help with disputes later

Financial services dispute resolution body, the Financial Ombudsman Service (FOS), says that clients should keep records of conversations they have with their financial planner.

“Make sure you record the time and date the conversation occurred, who was present during the conversation, where the conversation occurred, what was said and who said it,” a Financial Ombudsman Service spokesperson says.

“A detailed and contemporaneous note of a conversation with your financial adviser might just come to your aid in the event you have a dispute about the advice you received.”

If you can’t understand it, don’t do it

While your financial planner will have greater financial knowledge than you, that doesn’t mean you have to trust or accept all of the information they give you.

“If the adviser hasn’t been able to clearly explain to you – in terms you understand – how a product or strategy will make you money, then you should not agree to invest in the product or to take up the strategy,” FOS says.

“FOS receives numerous disputes where clients say ‘my adviser is an expert, so I just trusted him (or her)’.”

“In many cases, if the client had asked the adviser to provide better and clearer explanations, the dispute would not have occurred.”