Written

For

The

Australian

-

The

13

questions

every

investor

must

ask

their

financial

adviser

How does a $700m black hole in retirement savings happen when the advisers are licensed, the auditors are reputable and the research house gives the funds a favourable rating? That's the uncomfortable question hanging over the First Guardian and Shield Master Fund collapses.

Macquarie has stepped up and agreed to repay $321m to 3000 investors who accessed Shield through its platform. That's a win. But it still leaves 9000 people staring down financial ruin, having collectively lost more than $700m. And what did they do wrong? They clicked on a social media ad offering to "compare your super" and trusted the licensed adviser on the other end of the phone.

Behind the scenes, the picture emerging is straight out of The Wolf of Wall Street — flashy cars, first-class travel, tens of millions in illegal kickbacks, and appalling governance. Around 140 financial advisers are now under ASIC's microscope. That's roughly 1 per cent of the profession, which is far too many.

So should you swear off financial advice and go it alone? No. In 20 years, I've never met a new client where I couldn't improve some aspect of their financial position, and most good advisers would say the same. But you need to be brutally picky about who you trust.

Look for serious credentials — decades of senior experience, a finance degree, ideally postgraduate qualifications. Google the adviser, the firm and the AFSL. Ask for client references. Then use the gut-feel test in person.

And ask the hard questions most people never think to ask: Do you invest in what you recommend? How many clients have left, and why? What's the worst investment you've ever recommended? Can I see your complaints register and your approved product list? Any family or financial connections to the products you suggest? When was your last independent file audit?

If an adviser bristles at those questions, that's your answer.