Talking about your personal finances and swapping ideas about budgeting and investing with friends is one thing, but in many cases getting professional help makes a great deal of sense.
Not that you should get excited and think that a financial planner will solve all your troubles by offering you some get-rich-quick scheme. Indeed, if he or she does, you should grab your purse and run for the hills.
An adviser’s role is to help you establish your financial goals and develop a plan to achieve them over time. As the Australian Securities and Investment Commission (ASIC) notes, professional advice can be particularly helpful at times of big life changes, such as starting a family or receiving an inheritance.
The challenge is finding a suitable adviser you can trust. The recent string of financial planning scandals has shown that, sadly, untrustworthy and incompetent advisers are around.
One of the first factors to consider is a planner’s level of education, says Tanaya Bendall-Green, of Strategies for Life in Queensland.
It is not the case yet, but from 2017 the government is proposing to require advisers to hold a degree, pass an exam and spend a year developing their professional skills.
So finding an adviser with a degree in a relevant discipline such as finance, economics, accounting or financial planning is a good start.
Do some digging
Happily, there is now an ASIC register that lists all advisers’ qualifications, any professional bodies they are a member of, details about who owns their operating licence and whether they have ever been the subject of disciplinary action by the regulator.
Don’t be afraid to ask lots of questions of someone with whom you could end up sharing a lot of personal information and whom you need to feel confident has the skills and right ethical standards to take care of you. Write the questions down before you strike up an initial conversation. In other words, become a journalist!
The questions could include how much experience they have and who their client base is. Some advisers are generalists, but others specialise in certain types of clients, such as retirees, young savers or professionals with particular tax needs or investment constraints placed on them by their profession, such as requirements to avoid conflicts of interest. It might be comforting to know that the adviser has experience with people in a similar position to you.
How they charge is another important issue. Will they charge you a flat dollar fee or a percentage of your portfolio of assets? How often will you be billed? Will they charge you for an official statement of advice plus a separate fee to implement a savings and investment program, or will the implementation fee be included in the statement fee? (A statement of advice contains details of what has been recommended.)
As Bendall-Green points out, you should also ask what level of service you can expect. How many meetings a year?
It is worth taking the time to ensure you have a good overall picture of the person who might end up knowing more about you than almost anyone else.
Planning financial security for the family
Mel Liu first sought advice from a financial planner as a newlywed.
“We were thinking of the future as we were about to have kids,” says Liu, who is the finance manager of a national not-for-profit organisation in Sydney. “We wanted to get an idea of what the different products were out there.”
Nine years and two children later, the advice Liu and her husband, a commercial manager, received has proven sound. The managed portfolio they established after the consultation has done well, “though that’s probably a combination of good advice and timing of the market as much as anything”, says Liu.
“We sort of knew what we wanted and he advised the best thing to do given our risk profile. We had a mortgage and were planning to have kids and keep living in Sydney.”
The most difficult aspect in the whole process had been one which would be familiar to many – finding a planner they could trust and with whom they felt comfortable.
The one they saw had been recommended by their mortgage broker.
Liu, 43, has decided to next seek advice from the Brisbane-based planner her parents have used and been happy with for many years.
And that visit is imminent.
“We’re at that stage of our lives now that we would like some information on how to best save for the kids’ education and how to clear the mortgage,” says Liu. “We’re also ready for more long-term planning, even though retirement’s a long, long way away.”