Warning Signs Your Financial Adviser May Not Be Compliant

Vague or Hidden Fee Disclosure

One of the most common warning signs is fees that are unclear or difficult to find. Your Statement of Advice should include a clear breakdown of all costs — upfront fees, ongoing fees, commissions, and any exit costs. If the fee information is buried in long paragraphs or uses vague language like "various fees apply," this is a red flag.

Generic or Boilerplate Advice

If your SOA reads like it could apply to anyone with minimal changes, the advice may not be properly tailored to your situation. Your personal circumstances, goals, and risk profile should be central to the document. Generic advice is a sign that your adviser may not have done thorough fact-finding.

Pressure to Sign Quickly

If your adviser is pushing you to sign without giving you time to read the document and ask questions, treat this as a serious warning. You have the right to take your time, seek a second opinion, and ask for clarification on anything you do not understand.

Missing Reasoning for Recommendations

Under Australian law, your adviser must explain why each product or strategy was recommended and what alternatives were considered. If the SOA tells you what to do but not why, or the reasoning is shallow, this may indicate a compliance gap.

Complex Jargon Without Explanation

Your SOA should be written in plain language you can understand. If it is full of technical terms and legal references without explanation, it may not meet the standard for clear communication. A good adviser explains things in a way that makes sense to you.

What to Do If You See Warning Signs

Start by raising your concerns with your adviser. If they cannot or will not address them, consider escalating to their licensee or getting an independent compliance check on the document before signing anything.

Documentation Warning Signs

Poor documentation is a key warning sign. Red flags include: SOAs that use generic language not tailored to your situation, missing or unclear fee disclosure, no evidence of product research or comparison, and inadequate explanation of why the recommended strategy suits you.

Also watch for: SOAs that do not reference your stated goals, missing risk disclosures, no discussion of alternatives, and documents that seem rushed or contain errors.

Behavioural Warning Signs

Your adviser's behaviour can signal compliance issues. Warning signs include: pressure to make quick decisions, reluctance to provide written information, dismissal of your questions or concerns, recommendations that change frequently without clear reason, and recommendations that seem to benefit the adviser more than you.

A compliant adviser should: encourage you to take time to consider advice, provide clear written documentation, answer questions thoroughly, and clearly explain how recommendations benefit you.

What to Do If You See Warning Signs

If you notice warning signs, first discuss them with your adviser. If unsatisfied with the response, escalate through the licensee's IDR process. If the issue remains unresolved, lodge a complaint with AFCA.

You can also check ASIC's Financial Advisers Register to see if your adviser has any disciplinary history. Consider seeking a second opinion from another adviser before implementing any recommendations you are unsure about.

Frequently Asked Questions

What is the most common compliance issue?
Inadequate SOA documentation is the most common issue found in file reviews. This includes missing disclosures, insufficient basis for advice, and lack of evidence of product comparison.

How do I check my adviser's compliance history?
Use ASIC's Financial Advisers Register. It shows qualifications, employment history, and any disciplinary actions. You can also search ASIC's website for enforcement actions.

Can I change advisers if I am unhappy?
Yes. You can terminate the relationship at any time. Your new adviser can request your client records from the previous adviser to ensure continuity.

What if my adviser is not licensed?
Providing financial advice without an AFSL is illegal. Report unlicensed advice to ASIC immediately. You may be entitled to compensation if you suffered loss.

What AFCA Complaints Data Shows

The Australian Financial Complaints Authority (AFCA) received 104,861 complaints in 2023-24, an 8% increase from the prior year. Of these, 3,559 were about investments and advice, though excluding Dixon Advisory complaints, investment and advice complaints reached an all-time low of 2,709 — reflecting improvements in education standards and industry professionalism.

Key findings from AFCA's complaints data:

• Inappropriate advice remains the most common complaint type in financial advice disputes.
• Dixon Advisory: 2,773 total complaints received since AFCA's inception. Of these, 98.2% of determined complaints were found in favour of complainants, with $35.6 million awarded in compensation and an average of $329,996 per determination.
• Financial difficulty complaints rose 18%, including concerns about inadequate responses to hardship applications.
• Scam complaints surged 81% to 10,951, though they declined in the latter part of the year (averaging 500 per month vs. 900 previously).
• Licensees with most advice complaints (FY24): AMP Financial Planning (30), InterPrac Financial Planning (14), Madison Financial Group (11), NextGen Financial Group (10).

AFCA resolved 70% of scam complaints within 60 days, with 67% resolved at the first stage (referral to the firm). Of complaints that progressed to investigation, 60% resulted in full or partial compensation. Only 2% went to formal determination by an ombudsman.

Source: AFCA Annual Review 2023-24, AFCA Datacube statistics, Parliamentary submission on DASS.