What kind of person needs financial advice and what kind of value can an adviser add?

How to choose a financial adviser in 2020

Whilst majority of the population may ‘need’ financial advice, those who are going to get the most value out of engaging a financial adviser are those that have surplus funds of some description (whether that be month to month cashflow, or funds in savings/investments), and they want to commit to harnessing this to protect, build or manage their wealth in the pursuit of their financial goals.

People seeking advice in this criteria often find they don’t have the knowledge or the time (or both) to act on this themselves, or they simply want an independent coach or sounding board in keeping them accountable in what they want to achieve. In that vein, there is therefore no set amount of money one should have to see a financial adviser, it is a matter of finding one that you match with in going on this financial journey together.

The value that this professional advice should add to your financial wellbeing is also varied and very much specific to your personal circumstances. The biggest element of value may actually be intangible – freeing up your time and mindspace on financial matters so you can spend more energy on the things you actually want to do. As a brief example of what types of advice/strategies they can assist with:

  1. Protecting your wealth – strategies to ensure you personally and the people you care about are protected financially should the worst happen (eg Insurance), talking through and assisting to develop your estate plan
  2. Building your wealth – strategies on cashflow management, budgeting, building savings, building investments, managing debt, utilising different tax structures (superannuation, trusts, companies etc)
  3. Manage and Enjoy your wealth – Managing investment and superannuation portfolios, optimising tax structures and income streams, intergenerational wealth
  4. Specific Life Events  – assistance with the financial implications of significant life events, such as relationship breakdown, death of a loved one, entering aged care, obtaining a financial windfall (eg inheritance).

Most advisers will offer a fee and obligation free initial meeting, this is a great opportunity not only to ascertain if this adviser can help you, but also can you see yourself working with this person on what can be a very personal journey. Particularly if you are wanting to work with someone on an ongoing basis, very important you find someone you trust and get along with – as otherwise it may actually cause you more stress or financial pain in the long run!

So how do I choose a financial adviser that is right for me in 2020?

The key point for me is that it can be tough to find an excellent adviser. But there are plenty out there who are making amazing differences to clients lives. Below are some points which I think can assist you in choosing the right financial adviser.

Do they get to know you?
I’m not talking about tick-a-box know your financial balance sheet, but does the adviser really get to know what you want out of life and what you are wanting to achieve with your finances? This allows a good adviser to explore ALL options available to you, and know if going down one path can have a consequence on other things you want to achieve. If an adviser isn’t asking you A LOT of questions, I would be worried whether the financial plan will suit your needs

Do they know their stuff?
Ask an adviser what their qualifications are and look for someone who has gone above the minimum requirements, whether that be a Certified Financial Planner, a degree or masters. A piece of paper is definitely not the be all and end all, however I believe financial planning is potentially such a complex area you want someone who has advanced their learning to be able to help you as best as possible.

Where you have complex advice needs, such as self managed super, aged care, business succession or estate planning, it is also worth looking for a specialist in your area of need to ensure you are getting the full picture.

How are they paid?
Financial planning is a professional service, and as such payment is required for their work. This payment can come from you the client in the form of a fee, or from the product (for example, a commission from an insurance policy). While commissions are currently banned for products outside of insurance, it is important to ask whether your adviser receives any incentives for recommending one product over another. Paying for your advice from a product is not necessarily a bad thing, but you need to know all of the information to make your own decision about whether a planner is making a recommendation in your best interest.

It’s also worth asking what is the total cost of a financial plan, even if some things are an estimate. Reason being is there may be advice fees depending on the type of work an adviser is doing for you (like a plan fee, implementation fee or review fee), but also costs associated with any products recommended that support your financial plan (like share brokerage, managed fund or super fees, insurance premiums etc). This is to avoid any surprises once you have paid for the plan.

What can they recommend?
Majority of financial advisers will have what is called an “Approved Product List” of products they can recommend to you. This is not necessarily a bad thing, as it is impossible to know all products in the market inside out, and an approved list may be an indication of products an adviser or that adviser’s licence holder have fully researched and approved for clients.

However, it can also be an indication that the adviser is being corralled into recommending a particular set of products, so it is worth asking what the adviser is ‘approved’ to recommend, and when they can recommend things that aren’t ‘approved’. A simple example of this is that you may see a planner and have an existing super fund that you are completely happy with, but want some help with retirement planning and how to invest. If your super fund is not on the approved list can they still help you?

Choosing an adviser is an important decision, as it is a potentially long term relationship where they are assisting you with a big part of your life. So also think about do you like, trust and want to deal with this person ongoing and you will on the right track to finding someone right for you.

If you have any questions or want to have a conversation then please contact me at rhiannon@pekada.com.au.