financial planning

We all remember sage advice from relatives about squirreling away money for a rainy day. As small children, many of us believed that those coins in the piggy bank would be enough to bring all of our future dreams to life.

Unfortunately, life is a little more complex than simply putting money away in the bank and expecting to retire well.

“Most people don’t plan to fail, they fail to plan.” – John L Beckley

It’s hard to understand the intricacies of investment, debt management, insurances, retirement planning, taxation, and ever-changing regulations. Yet many of us resist getting advice from someone who can help.

Ultimately our book, ‘The 7 Easy Steps to Mortgage Freedom’ is about a financial plan of sorts, with the specific goal to become mortgage free (a very worthy goal in its own right). But this is only one part of setting yourself up for really living a life of financial freedom, faster and easier.

Most of us decide to manage our own financial affairs, because we think we know enough to do so and we believe the cost outweighs the benefits of the advice of a financial planner. It’s an easy decision to use a Mortgage Broker because the Broker doesn’t charge you anything, but a financial planner usually charges fees for at least some of their services.


Why use a Financial Planner?

“Planning is bringing the future into the present so that you can do something about it now.” – Alan Lakein

What images come to mind when you hear the title ‘Financial Planner’?

For many younger Australians, there’s a common misconception that only rich investors can benefit from Financial Planning.

In reality, financial planning is all about setting goals for the lifestyle you want to have — now and in the future, and then putting measures in place to keep you on the track to meet those goals.

In fact, even if you want a plan to help you save for your first home, or you want to plan the trip of a lifetime without a life-long credit card debt to follow, it might be a great time to sit down with a Financial Planner.


So what is a Financial Planner?

A Financial Planner (or adviser) is a person or authorised representative of an organisation licensed to provide advice on your finances, including matters relating to investing, superannuation, retirement planning, estate planning, risk management, insurance and taxation

Financial planning is all about deciding how you want to live — now and into the future, and then setting goals to make this a reality. A financial planner will guide you towards these goals, and educate you along the way so that you can make the best financial decisions for your future.

Financial planning can involve anything from basic budgeting and getting debts under control, to strategies for long-term wealth creation. For this reason, it’s never too early to start the conversation and get to work on your financial plan.


So why doesn’t everyone have a Financial Planner?

The most common misconception about Financial Planners is that you need to have enormous savings ready to invest before you start the conversation.

This couldn’t be further from the truth. In fact, if you’re struggling to save anything at all, it could be the perfect time to get an expert opinion.

Another obstacle facing many of us is that we aren’t sure who to trust, who is it that really has our best interests at heart and has solutions for our situation.

According to a survey by the Financial Planning Standards Board, in conjunction with the Financial Planning Association of Australia, knowing whom to trust is the biggest barrier to working with a financial professional.

Most Australians (64%) say trustworthiness is a very important consideration when choosing a financial planner, and 70% say they don’t know whom to trust.

The end result is that Australians are almost twice as likely to turn to family and friends for information (41%) on financial matters and planning as they are to turn to a professional Financial Planner (23%).

This resistance to use a Financial Planner is in contrast to the finding that only 16% of Australians are confident in their ability to achieve their financial life goals. In line with this book, being mortgage free is considered very important, with 62% placing a high priority on being free of major financial debt and 59% on being free of common consumer debt.

The good news, though, is that clients who work with a Certified Financial Planner are three times more likely to feel better prepared to achieve their financial life goals than those who don’t.

The right financial advice can give you confidence and show you that your dreams are achievable. If things are getting off track, a Financial Planner can show you how to get in control again.

  • $ Financial advice can help you:
  • $ Set achievable financial goals $ Make the most of your income and investments $ Get any government assistance you’re entitled to $ Take control and understand your finances $ Avoid mistakes that could cost you a fortune $ Protect your income and assets


So how can a Financial Planner make you financially healthier, wealthier and wiser?

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” Robert Kiyosaki

A financial planner will typically focus on the ‘6 Pillars’, which work together to set you on the path to ‘Financial Freedom’.

Pillar One – Budgeting and Cash-flow Management

Financial Planning begins with basic budget and cash-flow management.

If you want to stop living from month to month and wondering where all the money goes — you first need to achieve a surplus from your income.

Your Financial Planner will look at your income and expenses and help you work out what you want to achieve in the short and medium term. They will then work with you to create a realistic plan, taking your individual circumstances into account to show you how you can better manage your money.

Pillar Two – Investing

A Financial Planner can help you establish and manage an appropriate investment portfolio.

You don’t need very much to start an investment portfolio. Even a couple of thousand dollars can get the ball rolling and create some decent returns for you, as long as you’re happy to leave the money invested for a very long time.

To begin with, your Financial Planner will teach you about how investing works, and help you decide what sort of investment might suit your budget and personal circumstances.

They can also set up and manage investments on your behalf for a small fee — but don’t forget to ask how much the fees will be before proceeding.

Remember, investing isn’t meant to be exciting, although it is great to see the value increasing over time. If you want big returns that invariably means big risks. If you are looking for excitement, take $100 to the casino. Unfortunately, you probably won’t be taking much money home.

A bad financial plan

A bad financial plan


Pillar Three – Debt Management

It’s amazing how much money you can free up by getting some advice on your debts. It might be that your home loan no longer offers a competitive interest rate. Or perhaps you have a handful of credit cards all competing for your attention.

A financial planner can help to review and consolidate your debts so that you’re getting the best possible deal. They can also help you to free up cash from your weekly budget and avoid unnecessary repayments.

Your debts should be structured in a way that they don’t put enormous strain on your household income. Once you have some breathing space, you can start to save and put plans in place for your future.

Pillar Four – Insurances

Imagine if you (or your partner) were suddenly incapacitated and couldn’t earn an income. We all like to think that something terrible won’t happen to us, but in reality, we each have a friend or relative who has suffered a serious illness or accident. We’re only human.

One super-important role that your Financial Planner fills is to make sure you have the right insurances in place. If you don’t like to think about the worst-case scenario, that’s fine — let your Financial Planner be the morbid pessimistic one, and put some protections in place on your behalf.

IMPORTANT: don’t assume that you automatically have this protection as part of your superannuation. There is fine-print that (although boring) can have disastrous consequences for you or your family.

A Financial Planner can shop around on your behalf and make sure that you have all of your bases covered.

Pillar Five – Retirement Planning

Regardless of whether you’re 25 or 55 — you need to have a plan for your retirement. If you’re closer to retirement age, the difference is that you need a plan NOW and it might be a very ambitious one if you haven’t yet considered what sort of a retirement you want to have.

We all love to think that our superannuation will take care of us, but there are a myriad of other factors at play. Logically — if you can’t live on a tenth of your income today, it’s unlikely that you will be able to do so when you reach retirement age, especially if your super is accumulating and growing at the usual rate.

A Financial Planner can look at your superannuation and help you to make the most of it when you retire. If you’re employed in Australia you’re already saving 9.5% of your income. Why not take control of that investment and make sure you’re getting the maximum growth for the future?

If you do this at a young age — even better. Your Financial Planner will help you to see what you can achieve over time by making some small changes in this area.

Pillar Six – Estate Planning

You can’t take it with you, so wouldn’t it be nice to leave something behind for those you care about?

Again, we don’t like to think about this topic, but it’s the one thing in life that’s even more certain than taxes.

Regardless of your age and lifestyle, nobody is immortal and it’s important to think about the consequence if things don’t go to plan. Do you have a partner or young children who depend on your income? Are you nearing retirement age and want to make sure you don’t leave your spouse or children in a world of confusion because your will wasn’t properly recorded. This is something else that a Financial Planner can help you with, and once it’s done you can sleep easy and forget all about it.


How to choose a Financial Planner

So how do you find the right Financial Planner? There are a few big things to look for:


Financial Planning is a complicated sport, and it takes a long time to really understand financial markets, taxes, insurances and other aspects of the role. Don’t be afraid to ask about your Financial Planner’s industry experience to get a feel for how much they know.

Qualifications and licensing

Ask about the nitty gritty when it comes to qualifications. Do they have a degree and a postgraduate qualification in Financial Planning?

Are they licensed with ASIC to provide financial advice — or an authorised agent of a company who holds the license? Check this by visiting the Australian Securities and Investment Commission (ASIC) website.

Do they have an accounting background? This isn’t essential but it might help if you are hoping to minimise the tax you pay by structuring your finances to your advantage. If you’re hoping to minimise your tax, you can also consider seeking a Financial Planner who also has an accounting background or who works closely with one they can recommend.

What is their specialty?

Although they might be qualified to deal in any sort of financial planning, some specialise in or have a passion for certain markets and areas. For example, some Financial Planners are more comfortable working with clients who already have a lot of financial knowledge — others like to start from the ground up and help you learn about budgeting, saving, and investing for the future.

How comfortable are you?

At the end of the day, you will be having some fairly personal conversations with your Financial Planner and you need to feel comfortable doing so. It can be helpful to ask around for referrals from friends, colleagues and family to make sure you find a Financial Planner you can work with for a longtime.

What are the fees?

The great news is, just like mortgage brokers, Financial Planners are required by law to tell you about any income they will receive for their advice. This includes fees paid by you — the client, and also any commissions they might earn from third parties when they recommend certain products or investments to you.

Some Financial Planners work on fixed-price fees, so that you know how much you will pay for their advice. Others might charge a percentage on the amount of money you invest.

Don’t forget that old saying about peanuts and monkeys though… expect to pay something for good advice because the best experts are not likely to be the cheapest.

Regardless of the fee structure, most Financial Planners will offer you a free no-obligation meeting upfront to discuss their services and find out a little about your circumstances to see how they can help.

If you decide to proceed, the next step is a Statement of Advice, where your Financial Planner will give you an outline of their proposed strategy, the fees involved and what (if any) ongoing fees you can expect to pay in the longer term.

Fees vary enormously so make sure you shop around (keeping the peanuts in mind of course). Also — it’s often possible to pay these fees out of your Superannuation — ask your Financial Planner how this works.

Are they independent?

Many Financial Planners are employed by, or affiliated with, banks and other financial institutions who have their own financial products to sell. Keep this in mind when you shop around for a planner, because it might limit the range of products they can talk to you about.

You can usually access financial planning services through your bank, but you’ll be using the financial products (insurance, mortgages, etc.) that your bank offers. This might sound like an easy option, but an independent Financial Planner can also arrange all of these financial products on your behalf, after investigating the best options for you.

So before you make the decision to manage your own finances, keep in mind that a Financial Planner is not just for people who have six-figure savings to invest. When you work with them, they will focus on the 6 Pillars to set you on the path to financial freedom — which are:

  • Pillar One — Budgeting and Cash-flow Management
  • Pillar Two — Investing
  • Pillar Three — Debt Management
  • Pillar Four — Insurances
  • Pillar Five — Retirement Planning
  • Pillar Six — Estate Planning

If you’re ready to look for a Financial Planner, ask these questions:

  • $ What is their experience?
  • $ What are their qualifications and licensing?
  • $ What is their speciality?
  • $ How comfortable are you?
  • $ What are the fees?
  • $ Are they independent?