Giving financial advice

[Largesse]

Scenario is as follows:

I am reorganizing a member of my family's superannuation/pension/investment funds. (Getting rid of all the externally managed funds )
Going forward, I will be giving investment advice to this family member and managing their investments for them.
I will be remunerated for my time/services.
I will be channeling any payments received through an ABN. All payments will be 'above board'.

My question:
Do I need any licenses or certifications to act as a family members financial adviser if I am receiving payment for my services?
I have a B.Comm which i'm sure is useless in this situation.

TIA

L

 

[clayton4115]

ofcourse you need to be licensed to give financial advice!

you need to be licensed through a dealergroup and have the relavant qualifications to give investment advice, DFP 1-4 is a start!

ive done my B Com in Financial Planning and my CFP 1 to 4, i am PS146 compliant and can give investment / super / insurance advice through my licensee, you must be licensed to give advice

the penalties are quite serious if you dont have a license and give advice, see www.asic.gov.au of the penaties imposed.

regards

 

[Largesse]

ofcourse you need to be licensed to give financial advice!

you need to be licensed through a dealergroup and have the relavant qualifications to give investment advice, DFP 1-4 is a start!

ive done my B Com in Financial Planning and my CFP 1 to 4, i am PS146 compliant and can give investment / super / insurance advice through my licensee, you must be licensed to give advice

the penalties are quite serious if you dont have a license and give advice, see www.asic.gov.au of the penaties imposed.

regards

hey clayton, thanks for the response.
yes, am aware that I (obviously) need certification to give fin.advice to the public. was just asking whether this was applicable if the advice is given to family members?
Perhaps I can just say I am consulting for them and not specify it as financial advice?

 

[clayton4115]

well i think its a fine line in which you are going through, i suppose its ok to give them factual information, i,e if you earn less than $27,000 and you contribute $1k into super the govt will match it with $1500"

however if you say

i recommend you should invest $5000 in XYZ managed fund within Macq Wrap platform or i recommend oyou buy $5000 worth of CTX shares then thats a big no no if you are not licensed

as you are now recommend product rather than talking fact.

regards

 

[MS+Tradesim]

And what if something goes wrong and this family member sues you? You will have no professional indemnity insurance.

You're playing with fire if you are only considering a nice, rosy outcome.

 

[Largesse]

And what if something goes wrong and this family member sues you? You will have no professional indemnity insurance.

You're playing with fire if you are only considering a nice, rosy outcome.

thankfully my family isn't like that.
also thankfully, i have no assets in my name.

 

[Happy]

thankfully my family isn't like that.
...

Just to make sure, make them loose some money and see what happens

 

[Largesse]

Just to make sure, make them loose some money and see what happens

she's already down 250k off the Nov 07 peak

paid her lovely fund manager a good 40k for the privilege as well.

 

[Happy]

she's already down 250k off the Nov 07 peak

paid her lovely fund manager a good 40k for the privilege as well.

So, you've got some benchmarks.

Try not to loose her 250 and charge less than 40 and she should be quite happy with that.

 

[Largesse]

So, you've got some benchmarks.

Try not to loose her 250 and charge less than 40 and she should be quite happy with that.

hahahahah pretty much what i said to her!

"how about i lose you 250 and i'll only charge 25 grand!"

 

[Duckman#72]

thankfully my family isn't like that.

If Lawyers had $1 for everytime people started off a "business" relationship with those words,............ hang on, they get much more than $1!!!

The critical issue is - what are you getting paid top do? Filing paperwork, getting tax papers ready, and sundry secretarial than that's fine. But if you are recieving money for financial services then you are caught full stop - doesn't matter if it is your mum, my mum, your sister or the Pope.

Same with tax returns - you cannot recieve moneys for the preparation and lodgement of tax returns unless you are a registered tax agent or employed under one.

Duckman

 

[So_Cynical]

Ive no idea of the legality's involved here....however i remember that selling
an investment scheme (10 years ago) was very legal as long as it was marketed
to less than a certain number of people...IE: not the general public.

I think it was something like less than 20 people...perhaps this apply's to
advice as well, or something similar.

 

[Julia]

thankfully my family isn't like that.

Oh my goodness, what famous last words these are!

also thankfully, i have no assets in my name.

So, with this statement, you are mentally concluding that even if you stuff it up, you have nothing to lose.

Imo it's a fundamental mistake to act in any professional capacity (which it appears you're not qualified to do anyway) for any family member.
Even doctors, if they have any sense, don't treat their own family.

Sure, it might seem like a good idea to both you and the family member but how are you both going to feel if you lose more money for her?
And re the amount lost already, how would you have acted on her behalf to prevent that had you had the responsibility at the time?

 

[Krusty the Klown]

Ive no idea of the legality's involved here....however i remember that selling
an investment scheme (10 years ago) was very legal as long as it was marketed
to less than a certain number of people...IE: not the general public.

I think it was something like less than 20 people...perhaps this apply's to
advice as well, or something similar.

This was effectively outlawed when the Financial Services Reform Act of 2001 became law. Every person giving (or selling) advice must be licensed, also the investment "scheme" must also be licensed.

 

[Gerkin]

Largesse,
Interesting topic. As already stated you could ppssibly get into trouble for giveing the advice.
However could you please elaborate on the fees she was charged ? 40k in 18 months? What sort of product were they and was there a large ongoing commission to a financial adviser??
Also what would you do with her money? Buy shares, etfs, index funds?

 

[Largesse]

just your standard fund of funds type deal.

you give Investment Advisor your wad of cash, they pick a mixture of different funds that they think suit the investor profile (eg. BlackRock Growth, Goldman Geared, UBS Income Fund etc etc), and skim a fee.

Fee's included: entry fee approx 1%, management fee (this is broken down further but i cant remember all of the little components) approx 2% , exit fee 1%.

The IA's performance pretty much just achieved market returns..... before fees.

I haven't fully decided what im going to do for her (ahem, what she is going to do with her own money *cough*)
Luckily for her, she is well into pension drawing age, and this money doesn't represent her entire wealth, so the pressure to preserve capital at all costs isn't as strong, although it will be a major influence in my decision making. She does however need to draw some income from the fund.

However, If I had to do it all tomorrow, i'm thinking cash products are rubbish at the moment due to low rates, so will probably look towards some of the stronger dividend paying equities.
Maybe a 70:30 split Dividend/Growth.
WBC and ANZ (ANZ now that they have done their cap raising) look attractive on both a growth potential and dividend yield basis.
She already holds a decent chunk of BHP and WPL seperate to her pension fund, I may look to increase on these as I'm quite bullish on commods in the next 2 years.

Outside of that, MQG on a pull back or a run up, has to move either way, not comfortable where it is as the moment, CSL as a market leader Biotech and then maybe some mid-cap miners (producing) for a bit of bang for buck. Maybe a cheeky explorer or two for 1-2% of the folio.

Leave 10% of folio in cash as a opportunities slush, in case something jumps out that can't be ignored and needs to be acted upon immediately.

Naturally, i'll be running some standard portfolio modelling to ensure the quant side of me is as happy as the qualitative side is.

And there you have my thinking, feel free to shoot me down/constructively critisize all this. (except my spelling/grammar). Would love to hear some peoples thoughts. No Advice given/taken of course.

Nothing will be done until I am licensed (RG 146) or before July 1 so plenty of time to think more about it.


Edit: Seeing as i'm sitting here alone at the office at 10 to 9 on Sunday morning....
Re: ETF's, Index Funds: Not a fan. I think with buying a 'wrap up/all in" package you end up picking up the tab for the stocks that underperform with in the index. Obviously you can't go through the Index fund and go 'well, XYZ is doing rubbish, give them the flick'. You can match the market yourself pretty easily, assuming you have a bit of time to do the research. Even easier given the weightings of the biggest 10 XAO/XJO components.

Anyway enough from me

 

[Gerkin]

nice response. My only concern is that would be you are putting her into a high growth portfolio. 90percent aussie stocks, with no diversification across sectors ie international equities? Would this suit her needs?

 

[Largesse]

ahh yes, was waiting for you to point that out!

I gave international equities some thought, and will again. My only issue is that I could never call my self an expert in aussie stocks, let alone internationals. I worry that knowledge doesn't stretch far enough to extract good enough performance out of international stock.
This would force my into Index funds which I previously indicated my preference against. Further, I look across the globe and I don't see many economies/share markets that are anymore healthy than Australia's.
If I was going to diversify into any other equity markets, it would most likely be Asian

Currency risk is of some concern, but not a huge one. Wouldn't bother hedging against the greenback as it's up the creek. Perhaps a couple of long dated Yen calls. Still deciding whether the size of this folio warrants it.
May look at a smallish allocation towards Gold, but i would be more comfortable taking a position in a producing gold miner, rather than physical or CFD.

More things to ponder.

Keep them coming

Edit: Regarding her needs, it's actually proving hard to quantify what her needs are. She is quite 'funny' about telling us what she spends her money on and how much she needs to get buy. She does have a good folio of commercial and residential rental properties with safe long-term tenants which provide her with a steady and solid income. This also provides her with a capital back stop should the equity market tank (although property values will most likely follow this down). We'll be working on her over the next month to get her to spill the beans on what her income needs are.

 

[robots]

hello,

what about some real estate (not trusts) Large?

maybe a 70-80's flat, 30-40% deposit to get a neutral or + gear situation

an appealing property, garden outlook, garage, location

thankyou
associate professor robots

 

[Largesse]

hello,

what about some real estate (not trusts) Large?

maybe a 70-80's flat, 30-40% deposit to get a neutral or + gear situation

an appealing property, garden outlook, garage, location

thankyou
associate professor robots

hi robots,

fortunately she has those bases covered already.
zero gearing (her choice), providing her with constant income.
in your words "living the life"