Is your financial adviser independent?

• Many financial advisers are salaried employees working for financial institutions.
• Truly independent advisers should have no incentives nor conflicts of interest.
• Recognise the differences between independent and non-independent financial advisers.

It's important to know for whom your adviser works and whether they are independent or associated with other entities that may influence the advice provided to you. This information can help you determine any potential conflicts of interest.

Salaried financial advisers

Many financial advisers are salaried employees who work for medium to large institutionally owned or institutionally branded licensees, and their clientele usually consists of existing clients of these institutions.

Self-employed financial advisers

These advisers have often moved from being salaried to being self-employed, paying a fee to keep their clients. Rather than receiving a salary, they pay an agreed proportion of their fees to the institution and retain the balance. In return, they are supported by the financial institution's resources and have access to their research, compliance, paraplanning and other licensee services.

Aligned or non-aligned advisers

It can be difficult to confirm if an adviser is fully independent. However, some associations have membership criteria requiring financial advisers to practise without incentives and conflicts of interest. This can
potentially help when seeking the services of a fully independent adviser.

Financial planning practices

There are also financial planning practices that have their own Australian financial services (AFS) licence, with multiple advisers who are authorised representatives of these self-licensed advice firms. Such practices are similar to self-employed financial advisers in that they pay the licensee a proportion of their fees, retaining the support of the financial institution and access to its licensee services.