How can you know what you need when you don’t even know it exists? Quite often people gloss over the need for a financial planner because they are unsure about what they need, what financial planners can actually offer and are sometimes afraid to show their lack of knowledge. Let’s be frank, the industry in recent times has not helped itself with organisations like Storm giving their clients very poor advice. Rather than helping the clients to protect their wealth, they embarked on strategies that meant their clients’ wealth was all but lost.
To be simplistic, Financial Planners are experts in the field of helping you plan your financial future and implementing strategies to protect your wealth. We’re not just talking budgets here, they will work out your current financial situation and devise solutions that will help you increase your future wealth without burdening your current cash flow. They can identify tax minimisation strategies, increase your wealth through investment (through property, shares or other types of investments) and ensure you and your family are looked after in case of unforeseen circumstances. They often have relationships with many other experts including tax advisers, accountants, mortgage brokers and share brokers.
Most people think of seeing a financial planner when they are approaching retirement age and require advice on boosting their superannuation and retirement planning. However, there are many benefits in using financial planners in all stages of your life. You do not need property or investments or lots of savings. In fact, the less you have the more benefit you’re likely to get as a financial planner can help you make the most out of your income and structure your investments to create wealth for your future and provide wealth protection strategies. We all know the longer you consistently invest in a range of assets, the more benefits you will gain.
Over the years financial planners have received a bad name. There are a couple of reasons for this:
1. Pushed Products - the majority of financial planners work directly or indirectly for one of the major banks or financial institutions in Australia. This generally means that they can only advise clients on a limited number of investment products, most of which are the bank products.
2. Poor Investment Returns - in part this was a symptom of the Global Financial Crisis, but the other part was the astronomical fees on many retail financial products.
3. Too much Leverage is a Risky Strategy – Many of the investment strategies were unnecessarily risky. Either the client was too leveraged (borrowing to invest), and as we know the greater the leverage the greater the return, but also the greater the potential loss.
4. Inappropriate Investments – some of the investment types, e.g. trees, emu farms and like type investments were never going to deliver the returns claimed. Furthermore, the structures around these were usually very complex.
5. Excessive commission levels - some commission levels were so high that financial planners focussed on selling certain types of products regardless of customer needs.
Today, current regulations have banned certain types of commissions. However, one major issue still exists and that is that the majority of financial planners are ‘tied’ to one of the major financial institutions. They are highly likely to push products onto a customer because of their affiliations and these products may not best suit your needs. WealthMaker Financial Services is not owned by a large major bank or a fund manager and all our planning advice is completely independent.
An example of a good financial planner is one who can develop a strategy to reach your financial goals and can provide a broad range of investment choices. They are experienced and knowledgeable and should be willing to help you no matter what stage of the financial lifecycle you are in. In addition, they should not be driven by product commissions, but rather “put their clients interest first”.
Financial planners simply cannot know everything and so they often focus on a particular area, e.g. superannuation and retirement, tax planning or investment advice. It’s important you have a general idea of what you hope to achieve by seeing a financial planner so you can find one that best meets your needs. One general observation is to avoid people limited to 'selling' one investment product or solution.
To help you make a decision during an initial consultation each financial planner must give you their Financial Service Guide (FSG). This is your time to ask lots of questions and read this document carefully. Look for the following, do they:
If the answer is yes to any of these questions there is a conflict of interest and conflicts increase the likelihood of poor advice. Another way to assist in determining the right financial planner is to see if they are a member of a recognised industry body such as the Australian Independent Financial Advisers (AIFA) and Independent Financial Advisers Association of Australia (IFAAA) who encourage and support independent financial planners. Their members genuinely strive to promote a ‘gold standard’ and help people when they need it most. This membership should be in addition to their qualification membership with either the Financial Planning Association of Australia (FPA) or Association of Financial Adviser (AFA).
The right financial planner can help you set and achieve financial goals well above the expectations you might already have. You can start a conversation with one of WealthMaker’s financial planners today. We are completely independent and knowledge in almost all areas of financial advice and wealth creation. Call us on 02 9233 1111
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