• Christine Lusher

Financial Advice v Product Advice

Updated: Jan 26


As a financial planner I believe there is a degree of misunderstanding amongst Australian's with the difference between product advice and financial advice.

If I ask the question to a new client "What brings you’re here?" the answer is often something around "Making the most of my super", "Planning for retirement" and the question eventually comes up "What super fund should I go with?" Product advice is only one aspect of financial advice and while important is not going to make the biggest difference to retirement outcomes.

When it comes to superannuation there is a multitude of funds that are very similar and will meet most people's needs. Product manufacturers (i.e. super funds) like to promote their fund as being the latest and greatest online offering, benefiting members, having heaps of "free" features or low cost. This is not what will make the most difference to individual retirement outcomes. What will make a difference is financial advice.

What does financial advice look like in 2021? A financial plan will encompass your whole financial and personal life. It will include what your goals are for the short and long term. Consider the need for a savings plan, debt and mortgage reduction, tax planning, investment options, superannuation strategy and retirement planning. I also believe personal insurances are an essential element in financial planning - ask anyone who has ever had the need for a claim! These goals will change over the years and a financial planner will work with you to meet these changes.

Seeking advice from your superannuation fund is not financial advice. This is product advice and is inherently conflicted. Advice from your super fund or "intra-fund advice" and is not going to provide a consumer with much more than whether to choose the "balanced" or "growth" option and to deposit more cash with the fund they are speaking with.

In saying this superannuation fund fees do matter and it is important that the fund you choose has a competitive fee structure. But choosing the cheapest index fund available may not necessarily lead to the best outcomes. A well diversified actively managed account that takes into consideration your tolerance for risk and has some flexibility towards asset allocation will make a difference to your superannuation or investment outcomes over time.

Consumers need to separate product fees from advice fees - they are not the same and are for separate services. Most financial planners are moving towards fixed dollar fees so the fees should be easy to understand.

A good financial planner will see you placed in a better financial position over the long term than going it alone. That’s what I aim to achieve with all my clients.