The confidence of many investors have been affected by the global credit crunch. At this time many investors are asking whether their financial adviser had sufficient knowledge given the fall of their investment portfolio. In Australia to give advice on investing requires specific RG146/PS146 training. An adviser needs not only to have done these ASIC accredited courses but they also need to be acting under the auspice of a license holder. There are various aspects of ASIC training. It is not necessary that all aspects are held by any one adviser. For example an adviser giving advice on derivatives needs to hold the RG146/PS146 qualification in derivatives but does not need to hold the RG146/PS146 qualification in insurance broking for example.
Investors may wonder then if their adviser has RG146/PS146 qualifications then why did they allow their investments to fall? The reality is that growth investments such as shares and property are volatile investments and in fact investors should expect over time that investments might fall and sometimes like currently quite substantially. Undertaking Financial Planning courses allows advisers to understand the principles of the investment market but does not allow them to prevent losses from occurring. A Diploma of Financial Services (Financial Panning) course that is RG146/PS146 compliant teaches investment principles which allow advisers to consider strategies to minimise the impact of a market fall. An adviser may use derivatives to minimise the impact of a market fall. For instance if a share has a put option on it then the share can only fall as low as the promised level. A RG146/PS146 course would teach such principles. Not every investor would want to hold a put option on a share as it is a cost that would offset profits if in fact the share was to rise. Investment principles taught in financial planning courses teach that over time if a person is in a diversified portfolio the losses suffered will eventually be recovered. If an investor is trying to pick the highs and lows in a market then selecting the correct times is paramount for success but this is a skill that not many people do well. Even experts in this area make mistakes. If a diversified portfolio was invested over time then the need to pick the market trends is not necessary.
There are advantages for investors with a market fall and that is that prices of shares are more accessible. In actual fact buying when shares are low is the right time if an investor has the confidence that the market does not have further to fall. A large bank for instance is using the difficult time for smaller banks by buying them up when they are cheap and vulnerable. The PS146/RG146 courses train advisers in these areas. They also train them in various skill areas to deal with clients that are angry, uncertain or scared because of what has happened to their investment portfolio.