Everybody has a financial aspect to their lives. For some people, it dominates everything they do, night and day, and nothing else seems to matter. At the other extreme, there are those who rarely give a thought to their finances, are always in a financial mess, and who have to frequently dig themselves out of a hole.
For most people, the reality is somewhere in between. Money is important, but not everything. It is useful for what it empowers us to do (buy the necessities of life, raise children, buy a house, go on holidays, retire, etc.), and not for its own sake. In other words, the better we organise our finances, the further we can make it go. The more we can do with our limited funds.
This is where a good Financial Planner comes in. He or she should be able to help you organise your finances to get the best out of them, in line with your goals, circumstances and risk appetite. I have been giving Financial Planning advice for over 30 years. During that time I have seen many people’s lives improved by good financial advice, and sometimes damaged by poor advice.
So, what should you look for in good advice? And can you tell whether it is good or not?
Holistic
The most comprehensive financial plan is called a ‘holistic’ plan. It looks at your whole situation. Of course, many people don’t want advice on their overall position, but just on some particular issue. Just make it clear to your advisor what you want looked at.
In the case of a holistic plan, the list of things includes Insurance (life, trauma, income, disability), estate planning, taxation, Centrelink, retirement planning, superannuation, investments, income levels, taxation, aged pension, to name some of the main ones. There is a common misconception that financial planning is all about investment – but nothing could be further from the case. Investment is one very important part, but it is far from the complete package.
Starting Point
The starting point of any financial plan should be your current financial position. The planner should ask for details of your assets, liabilities and income as the basic starting point. Then he (or she) should ask about your aims in life, and get an idea of your risk profile.
This should then form the foundation of the plan. It should address your goals and objectives, and take account of your current position. Any financial plan should be highly personalised. It should be suitable for you, but may be unsuitable for anybody else.
The plan for somebody entering retirement will look very different from the plan for somebody who has, for example, just got married, bought a house, taken out a mortgage and is thinking of starting a family. Within these groups there will be big differences, and the plans for two retiree families may look very different, based on their different overall positions.
Beware mass produced, standardised plans that don’t take your circumstances into account or are the same for everybody. Also, make sure that your financial planner is attached to an organisation that is licensed through ASIC. It is no guarantee against loss, but at least the person you are dealing with has had to meet some criteria, and is accountable to some extent.
