The importance of receiving financial advice without borders


Different professionals are able to give advice about a specific field – but who’s taking responsibility for looking at the big picture? How do you know if opportunities are slipping between the gaps? What if you have an issue/problem/question that bleeds over a few different fields?

Firstly, it is important to understand the what different professionals can and cannot talk about (by law).

Mortgage advice

To give advice about a mortgage, borrowing capacity, interest rates, products and so on the professional must hold an Australian Credit License (or be an authorised representative of an ACL holder). You can search ASIC’s register of credit representatives here.

Tax advice

Anyone that provides tax agent services (tax advice, lodge tax returns, etc.) for a fee must be registered with the Tax Practitioners Board. You might find that some well-meaning professionals (such as mortgage brokers or buyer’s agents) offer you tax advice or express an opinion about how an item should be treated for taxation purposes, but you should always confirm this advice with a Registered Tax Agent. You can search the Tax Agents register here.

Financial advice

To be able to provide financial advice, you must hold an Australia Financial Services License (AFSL) or be an authorised representative of a holder. Financial advice includes cash flow management/budgeting, investing in shares, superannuation, retirement planning, estate planning, risk management and so on. I have written previously about the importance of selecting a truly independent advisor. You can search the AFSL register here.

Property advice

A person cannot recommend and help you purchase a property unless they are a licensed real estate agent. Licensing is State based and this page provides a good summary including links to registers.  General property investment advice is completely unregulated and I have written about why this is a problem in The Australian here. Therefore, if you are paying for property advice, be very careful.

Insurance advice

Many financial advisors also provide insurance advice. However, sometimes professionals are insurance advisors only i.e. they have a limited AFSL.

What can and cannot be covered…

Therefore, mortgage brokers can only give advice about credit (mortgage) products, not cash flow or taxation matters.

Tax agents can only give you tax advice and cannot comment on cash flow, investments, mortgages, superannuation and so on.

A financial planner can’t talk about tax consequences or give you borrowing advice unless they hold the appropriate licenses.

The problem is many financial decisions are interrelated

Many financial decisions cross over multiple fields and require input from various professionals to ensure you arrive at a thoroughly well-considered conclusion. Take the decision to upgrade or downsize your family home for instance. Whether to do this and at what budget would include borrowing considerations (mortgage broker), cash flow and retirement planning (financial advisor) and possibly taxation (tax agent).

Some decisions are relatively simple and only need brief input. However, more complex issues can result in a lot of back-and-forth between the different advisors before an optimal solution is found. The risk in this situation is that its open to miscommunication, misunderstandings and/or omissions.

Who’s responsibility is it?

Who’s responsibility is it to ensure all your advisors are engaged in dealing with your financial matters when appropriate? There are three possible solutions:

  1. You need to take responsibility for this. This means its your responsibility to ensure you communicate with each individual advisor and ensure any plans and advice is shared amongst them. My key bit of advice is that there is no downside to oversharing. That is, be careful to assume that a bit of information isn’t relevant because you don’t know what you don’t know. Share everything and let your advisors decide what is relevant or not.
  2. Engage a holistic independent firm. The firm should be independent and hold all three key licenses (AFSL, ACL and Tax Agency). Secondly, the firm must have a good collaboration culture – so they are sharing information about clients amongst themselves – rather than working is silos. I know that this is easier said than done as a lot of effort in our business goes into ensuring we are effective sharing information between ourselves.
  3. Engage a group of firms that have a deep relationship with each-other. If you deal with independent businesses that know and respect each-other there is a greater chance that they will pick up the phone and share ideas/solutions about your financial situation. You will still need to facilitate and encourage the communication, but it will be easier.

There are non-advice benefits too

If we have set up insurances for a client, then our tax accountants know to ensure they claim a tax deduction for their income protection premium. Similarly, if we have set up a client’s loan structure, we will ensure those interest deductions are correctly reflected in our client’s tax returns. When the right hand knows what the left hand is doing, nothing gets missed. Its our responsibility to ensure we pick these things up, not yours.

Holistic might not suit everyone

The key point I want to get across is that many financial decisions require a multi-disciplinary approach which means you must ensure all your advisors are included in the conversation. Most people don’t have the knowledge and experience to identify what information is relevant to each advisor. Any omissions or miscommunication can cause expensive and sometimes irrevocable mistakes or missed opportunities. If you acknowledge this fact, then you must select one of the three solutions above.

Ultimately, the more eyes you have looking over your financial circumstances, the greater the chance of you maximising your opportunities. Over the past 17 years of operating a multi-disciplinary, holistic financial services business, I observe this benefit on almost a daily basis.