'make Sure The Experts Are Expert'
Sun Herald
Sunday March 5, 1989
THE investment advisory industry has mushroomed in the past 10 years.
It has grown as taxation and superannuation legislation has complicated people's worries over managing their money.
Investment advisers can do a little or a lot for people, according to John Godfrey, the managing director of Godfrey Weston, a nationwide investment advisory group.
This boils down to once-a-year client meetings to keep up to date with new products and legislative changes which might affect their portfolios, or people putting their financial affairs completely in the hands of advisers.
Mr Godfrey came to the advisory business through a circuitous route.
His previous career encompassed merchant banking, accountancy, and banking and he started Godfrey Weston in 1981 and sold 90pc of the business to insurance group National Mutual in 1984.
He has always been involved with finance, and thinks clients should know their advisers' backgrounds.
"People should know at least three main things when they deal with an investment adviser," said Mr Godfrey. "First, they should determine if they are trustworthy. They should know if the advice is impartial. And they should know if the advisers are knowledgeable."
All common sense, perhaps, but since most people handle their finances in a lackadaisical fashion, it is better to make sure an investment adviser won't do the same.
Investment advisers have the opportunity to develop their skills through formal training, taking courses at university or places such as the Securities Institute of Australia.
They are also subject to some outside control in their activities-for instance, the law stipulates that advice be "impartial, unbiased and independent".
The law requires that advisers give advice which is both researched and related to the needs of the client-it sounds obvious, but it is important.
Potential clients of any investment advisor should ask questions, such as finding out the financial institutions with which investment advisers deal on a regular basis.
This can reveal the names of key suppliers of financial products, and indicate whether the advisers' investments on behalf of clients are loaded in a particular direction.
"There is nothing inherently wrong in dealing with someone with only one product range," said Mr Godfrey, "but one should be aware of the situation."
Mr Godfrey said there are also "discounters" in the personal investment advice game who will place business and return the commission to the client.
But, he warned, "then you've got to be aware of their ongoing advice and care of the clients' investments". There are a couple of important issues currently under consideration in the investment advisory industry, one of which is the treatment of the return to investors of commissions which they have paid to advisers as fees.
According to Mr Godfrey, the latest ruling from the Tax Commissioner is that these rebates are a return "of original capital and therefore not taxable".
© 1989 Sun Herald