When it comes to managing your money, issues like dealing with surplus cash flow, making big investments, climbing the property ladder, planning for retirement, and more could be part of the mix.
With such a tall order, you might be in the market for a financial planner who can step in, hold your hand, and help you navigate the complex landscape of your finances. So, how do you locate a good financial planner? Most importantly, what’s the cost, and how do you ensure you’re still hitting your financial goals square on the head?
What’s a financial adviser or planner?
There’s a hodgepodge of professionals on Australia’s financial planning landscape. But if you need help staying on top of your finances, you should do your homework before engaging any financial planner or adviser. To point out the slight difference between the two, a financial planner is a specific type of adviser who helps you craft a long-term program that helps you meet your financial goals.
On the other hand, “financial adviser” is a blanket term that covers professionals who help you knuckle down on specific financial goals. Across the board, financial advisers and planners have more know-how regarding saving, investing, and managing money. This can be handy if you’re faced with a situation that’s way over your head. For instance, you might need expert advice before you sink your finances into several investment products.
Should I sign up for financial advice?
It all boils down to whether you have the time, confidence, and savviness to chase after your financial goals without help. If you’re looking for general guidance on debt management and building cash savings, you can easily scour the market for free resources.
But if you find yourself treading unfamiliar water, it’s generally best to seek advice instead of risking it all. By way of example, enlisting the services of a financial adviser is recommended when you:
- Inherit money
- Buy a house
- Have a child
- Get divorced
- Get retrenched
- Plan for your estate or retirement
Which services should I sign up for?
A financial adviser’s services can be loosely split into the following:
- One-time advice. If you’re a simple needs client, you’re probably better off sorting everything in a single visit to save money. Issues like buying property and deciding whether to scale up your super contribution shouldn’t require numerous treks to your adviser’s office.
- Comprehensive, long-term advice. If you’re in the market for a long term financial plan, an adviser can help you with profitable pointers related to investments, taxes, savings, insurance, and retirement planning. A single sit-down should generally take care of this. But, you can always bring the plan back for sprucing whenever it falls out of sync with your goals.
- Ongoing advice. For obvious reasons, some financial advisers zealously market their ongoing advice service. However, you’ll only need to take up the offer if you’re knee-deep in large amounts of income, savings, assets, and investments. For this, you’ll need the financial adviser on hand to monitor and review the strategy you have in place to meet your goals.
Types of financial planners
Fee-based vs commission based
For the most part, the Future of Financial Advice (FoFA) reforms have cracked down on commission-based services. But, you’ll still need to be wary when it comes to life insurance products that have somehow slipped through a loophole in the newest regulations. Generally, it’s best to recruit a fee-based or independent financial adviser who can freely recommend products that span the entire market.
Planners who work for a commission have sometimes been found guilty of pushing only specific products, thereby limiting you to a particular part of the market. With commission as the carrot at the end of the stick, it’s easy for a financial planner to lose sight of your best interests.
Face-to-face, online, and automated financial advisers
For low-cost options, you can consider planners who conduct business over the telephone or through online means. You can also avail yourself of the benefits of digital technology by checking out Robo-advice. This is a computer program that churns out advice using an algorithm after you feed it your financial details. While this may sound fascinating and futuristic, there are still many limitations to speak of when it comes to getting in-depth advice for complex financial affairs.
A more up close and personal meeting with your planner is preferred but expensive, especially if they have offices in a swanky part of town. Keep in mind the overhead costs will inflate your bill. However, the first introductory meeting is usually free, so there’s that.
How do I track down a good financial planner?
When searching for a good financial planner, you can cast your nets wide in several ways:
- Ask family and friends – Referrals are one of the best ways of getting a lead that pays out.
- Use search engines – Simply typing “financial planners near me” can do the trick.
- Check websites for professional associations – These often have databases and registers of qualified and licenced professionals. For instance, you can try the Financial Planning Association and the Association of Financial Advisers.
- You can also check your super fund, credit provider, and other financial institutions.
Do qualifications matter?
Always ask for qualifications before getting down to business. Previously, advisers could get by with passing off monogrammed business cards which were of scant value to clients. According to new legislation, a qualified adviser should now boast a bachelor’s degree.
They should also pass strict tests to ensure compliance with ethical codes and professional development requirements. Asides from qualifications, you should also check for the following:
- FoFA compliance. If an adviser is FoFA compliant, they should embody the key principles outlined in the reforms. These include acting in your best interests, providing fee disclosure statements, and opt-in notices, which protect you from being charged for advice you’re not interested in using. Lastly, and perhaps most importantly, the adviser should not be motivated by the promise of high commissions when dishing out advice.
- Licencing. Your planner should be registered with ASIC.
- Level of expertise. For more detailed information, read the adviser’s financial services guide on their website. The important thing is to make sure you can buy what they’re selling. In other words, the areas they have expertise in should coincide with the areas you need help with. Remember, stockbrokers, accountants, and financial counsellors can only give you advice if they’re licenced to do so.
What do I look out for when meeting with a financial planner?
When shopping around for a planner, you should draft a short-list of promising options and then set up one-on-one meetings. When you show up, take the first step in establishing a relationship by providing the following:
- Household budget with full details about income and expenses
- List of assets such as savings, investments, property, car, and super
- List of debts such as personal loans and credit cards
- Insurance policies
- Comprehensive list of financial goals whether short term or long term
- The level of risk you’re willing to take
In turn, you should also ask your planner the following questions:
- Do you operate under a financial institution?
- Do you receive a commission when you recommend products?
- Can you explain why these recommendations are valid aside from you receiving commission from them?
- How often can we expect to meet based on my current needs?
- Do you have a special area you focus on, and what are your professional qualifications and level of experience?
- How much do I have to pay when getting started and at every point along the way?
How much should I pay?
This depends on the type of services you subscribe to, but charges can include a plan fee, product fees, and ongoing fees. Under a different pricing model, you may be required to pay a specific percentage of assets under management. Remember, there’s no such thing as a free lunch. Planners who offer free services usually work for a commission. Therefore, they’re merely waiting to cash out on money you invest, and taking their advice will likely end up poorly for you.
How do I get the most out of my financial plan?
So you finally have your financial plan in hand? What next? Make sure it spells out everything clearly and accurately – from an assessment of your current needs and situations to details of how specific recommendations will change the status quo. If you’re dealing with a true professional, expect to see a professional-looking document complete with page numbers, a table of contents, and an executive summary.
If you feel the plan is not up to scratch, clarify your areas of concern and ask the planner to work on it more. Once the plan is complete, make sure it doesn’t get buried at the back of your desk drawer. Instead, negotiate a reasonable fee that allows you to review the plan here and there to accommodate your changing financial needs and goals.