How to protect yourself from bad advice

The Royal Commission into the banking and financial services industry has been a shock for most of Australia, with even some of the most well-known celebrity advisors and brands getting caught up in the revelations about dodgy practices and bad advice.

The most crucial thing for investors of any kind is to ensure you are getting the best advice possible.

While it’s not always straightforward to determine whether the expert you are intending to rely on is trustworthy, there are some steps you can take to ensure you are protecting yourself.

  • Referrals and testimonials
    Firstly, it’s always worth speaking to former clients of the particular expert you’re considering. You should be sure to check out online testimonials as well, but instead of just reading those on the expert’s side – which could be fake – look for forums and Facebook comments. Seek out other peoples’ opinions on Whirlpool and Property Chat forums.

    The best experts are typically those with a strong track record, so you could also find a professional with the skills you need by speaking to other investors who have already done what you’re trying to do. If you seek out an opinion yourself, rather than relying on handpicked references from the expert themselves, you’ll likely have a more trustworthy result.
  • Official checks you can make
    The government provides several free, online tools to help consumers do their background research. Depending on the industry, some experts need specific licences to practice. For instance, real estate agents need to have a real estate licence (regulated by the Office of Fair Trading), mortgage brokers need a finance broking licence (regulated by the Australian Securities and Investment Commission - ASIC) and financial planners typically need an Australian Financial Services (AFS) licence (also regulated by ASIC) or be a representative of a licencee.. A quick Google search, or calling the government’s MoneySmart line, can typically tell you what bare minimum requirements someone should have. You can check online the status on someone’s licence by doing a quick google search and finding the relevant site. For example will allow you to check for a real estate agent registered in NSW.

    ASIC has registers you can search, including checking for banned and disqualified people, double checking that someone’s financial services licence number is valid on the ‘professional register’ and find out if a company is being wound up. If they do not hold the correct licence, steer clear or ask for an explanation.

    You can also check Fair Trading NSW’s complaint register (for NSW real estate agents), which is published monthly and includes any company with more than 10 complaints during that time, and their register of conveyancers and property professionals. There are similar registers in each state and territory.

    It is also worth asking for their background, in terms of prior jobs, education and their own success with investing where relevant. This can often easily be checked with a few phone calls if you are concerned about the veracity of the information.

  • Memberships and industry bodies
    You should check to see whether your expert is a member of any official groups, such as the Real Estate Buyer’s Association of Australia (if using a buyer’s agent) or the Mortgage & Finance Association of Australia (if using a finance broker). While membership to professional organisations is not a fail-safe, you can check the group’s charter to determine what skills and minimum requirements there are to join – if any. There may also be additional protections available for customers. Call the organisation and ask what the benefits are if you choose a professional listed as a member if it’s not clear from their official site, and enquire about any complaints made about specific members.

  • Unmeasurable checks
    Lastly, you should always consider your instincts and gut feeling about a professional. Do the promises being made seem too good to be true? Do the fees being charged seem too low? Do you like the person you are dealing with, or does something feel “off”? Do you feel that you are being pushed? This may seem like a difficult way to judge someone, but you’d be surprised how many people manage to avoid trouble by listening to their inner voice.
  • Five things to do when choosing an expert
  1. Thoroughly Google search for reviews, news articles and media presence and any comments left online in forums. Check their social media pages if available.
  2. Check how easy they are to contact. Do they have a number and clear information on their website? Are they responsive to emails and phone calls?
  3. Look for credentials, education and qualifications. Membership to industry bodies and groups can be a plus.
  4. Ask what insurance coverage they have. Anyone in business (including mortgage brokers, financial planners and real estate agents) should have professional indemnity insurance and public liability insurance. If not, it has to be a red flag.
  5. Read the fine print. When you get round to obtaining a contract or agreement of some sort, make sure you go through it carefully and know what you’re signing. Do not give in to high-pressure tactics.