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Buying financial advice is a different experience than buying a new washing machine. Mind you, many investors would argue that they have been through the wringer over the last two years!

The trouble is, it is very hard to assess the quality of the advice you are buying in advance, and it may not be until some time after receiving and acting on the advice that you realise it was good, bad or indifferent. Moves are afoot to regulate the financial advice industry with the aim of improving the quality of financial advisers and the advice they give.

It may take several years before the benefits of these changes are felt in full. In the interim, there are many people who need good financial advice who don’t know where to turn and who feel ill-equipped to distinguish between good advice and bad.

One of the hallmarks of good advice is that it is put in writing. In general, there are two categories of written advice that you can obtain from a financial adviser; an investment plan and a comprehensive financial plan. An investment plan quite obviously sets out investment recommendations but it does so in the context of your current financial situation, your attitudes towards risk and your financial goals. It is therefore aimed at investing your funds so that you can achieve your short and long term goals with an appropriate exposure to risk. Because every investor has different goals, financial circumstances and attitudes to risk, investment advice should be tailored.

A good investment plan will include:

A summary of your current personal and financial situation
Your goals and investment time frame
Your attitudes towards risk and return
Details of the recommended investments and reasons why they have been recommended including consideration of investment risk and return
Reasons for any recommended changes to existing investments
Details of how you can implement the plan
A clear summary of any costs you will incur by implementing the plan, including brokerage, up front and ongoing advice fees
Details of how the adviser will be remunerated when the plan is implemented, including any upfront or trail commissions or other remuneration received from product suppliers or intermediaries.

A comprehensive financial plan considers not only investments, but your entire financial situation, including money management (budget), retirement planning, insurance, estate and tax planning. The plan should identify issues and strategies in each of these areas and may highlight areas where you require specialist advice from other experts such as a solicitor or tax consultant. Financial plans are not just for people with money to invest; they can offer considerable value for those who are starting out in life or struggling with a mortgage but want to make their money work better for them. Some advisers prepare plans free of charge if there is business done as a result of the plan; others may charge up to $1,500 or so. Whatever the cost, a well-prepared plan can result in improvements in your financial situation which exceed the outlay.