Question 1

• I need help planning our retirement and I believe we should see a financial adviser. The problem is I’ve worked, over a decade ago, in finance. There I saw financial advisers selling products where the advisers made the most money rather than what was best for the client. I know two people that lost 50 per cent of their money in a week by purchasing products recommended by financial advisers. I’ve also read that advisers can charge up to $13,000 for the first year of a plan. Given all of this I’m trying to find out the best way to choose a financial adviser. Just where do we start? Thank you.

Unfortunately, there were cases where financial advisers either prioritised their own interests over their clients, or they put clients in high-risk investments that their clients did not understand.

This has resulted in new laws and additional requirements having to be undertaken by financial advisers.

This includes:

• All advisers must follow a code of ethics that prioritise their clients over themselves. This seems like this should have happened many years ago
• All existing and new advisers had to pass a competency test
• Certain forms of commission have been banned.

Education requirements were lifted including the requirement to complete a degree relevant to financial planning by the end of 2025.

Unfortunately, at the last minute the government gave in to a minority of advisers who can rely on ‘experience’ and get out of doing further study.

You can see what study an adviser has completed by searching them up on ASIC’s Financial Advisers Register.

This also shows whether they have been subject to any disciplinary action.

The following may help you in choosing a financial adviser:

• Contact or use the Financial Advisers Association of Australia’s ‘find financial planner tool’
• Use the Financial Adviser Register to check out their qualifications.

You have mentioned you know people who have had bad experiences.

There are far more people who have had good experiences, ask family and friends.

See how they have been rated by others using the adviser ratings website.

Contact a shortlist of advisers to discuss:

• How they charge and get paid
• Do they offer a free first appointment?
• Whether they specialise in anything specific.
• Ask for their Financial Services Guide (FSG), which will detail further information about them and their services.

It’s encouraging that you have recognised you need some financial advice.

In the vast majority of cases a financial planner/adviser can make a very positive impact on someone’s retirement.

When doing your research, it will also help if you have some idea of the level of advice you require as this will also assist in choosing an adviser.

This includes whether you want to partner with an adviser to provide ongoing advice, or whether you just need a plan put in place now for you to follow and perhaps review some years down the track.

Question 2

• I met a condition for early release of my super several years ago due to poor health. Since then we have lived on my husband’s income. He now wishes to retire at 55, I am 54. Is there an advantage to using either my super or his to make an income stream? He will reach 60 first so would be tax free. We are fortunate to own our home and to have around $1 million each in super. Thank you, Michelle

Hi Michelle,

If your husband wants to retire at age 55 bear in mind, he cannot access his super until he reaches age 60.

Therefore, that’s five years of income that needs to be planned for. You and your husband will need to discuss this.

If you can access your super due to health issues, then I assume you were classified as Total & Permanently Disabled (TPD) and may have had an insurance payment into your super.

To work out the tax consequences, firstly you need to ascertain what the tax components are within your super.

It will be a mixture of a tax-free components and a taxable component.

And when you receive a payment from your super, whether via a lump sum or pension payment, they have to be withdrawn proportionally, e.g. if your tax-free component is 20 per cent of your balance, then 20 per cent all payments will come from the tax-free component.

As the name suggest the tax-free component is always paid tax free.

The taxable component is taxable and the rate you end up paying will depend on how much you take and whether it’s paid as a lump sum or via pension payments.

As you have indicated once you turn age 60 then this can then also be paid tax free.

There are some intricacies and strategies that could be implemented to increase your tax-free component (and pay less tax) when you have been classified as TPD.

Therefore, I suggest speaking with your super fund or a financial adviser.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.