Planners spend the majority of their time advising clients on the following: investment planning, retirement planning, tax planning, estate planning, and risk management 

There are many misconceptions on what the role of a financial planner does, by now we hope that you have a more robust understanding of their important role as part of your financial future.

In terms of what they do from a top-level as well, we have discussed in terms of their setting a roadmap for you, presenting a range of financial investment and superannuation options, and working with you to develop a plan to get out of debt and into a solid financial position.

However, when it comes to the day-to-day, what does a financial planner do? How does this benefit you as a client and why does it indeed matter to you at all?

Although a financial advisor may only sit down with you as a client for an hour, maybe two or three, by no means is this the end of their time spent on working on your account.

In order to do that proficient meaningful advice, they will need to meet and discuss your current situation or portfolio with your lawyers, your accountants, investment bankers (if you have one), fund managers and other financial service providers you may have working with or for you.

Even if you are only just starting your journey into getting financial planning advice and services, your financial planner will be researching your spending habits, financial acumen, ability to save, repay debt, debt levels and potential earning capacities.

All of the above is purely just researching into you, and then they will sit down and map out a plan, a schedule of advice and a range of products across a broad spectrum of financial instruments best suited to meet your financial objectives.

According to the Institute of Certified Financial Planners, planners spend the majority of their time advising clients on the following: investment planning, retirement planning, tax planning, estate planning, and risk management^[1].

While a financial planner may undertake this for an extensive list of clientele, they also are required to complete ongoing CPD courses, attend seminars and conferences on financial planning, review and research fund, share and portfolio performance, all the while ensuring that their ‘funds under management’ are all performing.

Financial planning advice cannot be provided to you without the proper research and understanding of market variables that could impact your financial performance – and ultimately the time when you will retire, buy an investment property or go on a family holiday.

As such, your financial planner not only needs to understand the market, the products and services available and ensure they are compliant in every way, but they need to understand you.

As you can see, where many people may feel that financial planners are charging high fees for ongoing management of your affairs, they are highly skilled individuals that need a broad understanding of all financial matters, markets and legislation to ensure they provide you with the very best service.

[1] https://www.princetonreview.com/careers/176/financial-planner

Financial planners, accountants, stockbrokers, bank managers, mortgage brokers … each has their own set of specific skills and can help you along your financial journey.

When it comes to investing in your financial future, there are many professionals that can help you on your way. Financial planners, accountants, stockbrokers, bank managers, mortgage brokers and then some. Each has their own set of specific skills and can help you along your financial journey.

However, there are some key differences to the skill set, advice and information that each of the above are able to legally provide you. Moreover, you as the ‘client’ have a fiduciary responsibility to yourself (as the end beneficiary of the next set of actions you take on your financial future) to understand where the services of one and the other interact, cross over and should be kept apart to maximise their effectiveness for you.

How are accountants and financial planners different?

We all know around July each year we need to start collecting our receipts, reviewing our car travel for work and book an appointment with an accountant to do our tax. Those who may run their own business understand that there is a lot more to accounting for small businesses, such as running regular BAS statements, business reconciliations, payroll tax submissions and much more.

In addition, if you are planning on purchasing a house in 1, 3, 5 or even 10 years, an accountant can make sure all your books are in order to achieve that. They can sign off your financial statements and submit information on your behalf once they have clarified it to the ATO.

Meanwhile, a financial planner is less transactional, less about what has been done in the last month, quarter, year or reporting period. They are more about planning for the future, your future.

Their services include recommending investment opportunities, diversification of your assets, planning for your retirement and setting yourself up with a plan for financial security into the future.

Why do you need both an accountant and a financial planner?

To use a sporting analogy, in the game of cricket you need a bowler and a batsman. Your financial future is no different, you can just have an accountant (bowler) putting your taxes in each year, ensuring that you are compliant and everything is up to date – in other words - bowling the ball down the pitch.

This is fine, you will do as you have always done, in fact, you will do as well as the majority of the population who don’t understand the true benefits of a financial planner.

However, if you add the batmen to the game (in this instance, the financial planner), they are there to take the information, situation and available options and provide an array of investment options (shots) that you can use to score runs on your financial scoresheet.

Accountants and financial planners are not in competition with one another, quite the opposite. They work with one another to review your current financial situation & compliance to tax (accountant), then use this with your future potential earnings, current risk aversion and a range of other factors (financial planner) to set the best plan out for you as an individual.

Surrounding yourselves with two financial experts – such as an accountant and financial planner – also has the added benefit of both having access to your records, and keeping each other accountable for their choice of investment opportunities, potential rewards, also if you have any reservations of one or the others service, you have the option to communicate this and seek independent advice.

Accountants and financial planners are both vital to your future financial wellbeing, the sooner you have both working together in your best interests, the better you will see your financial potential.

A financial advisor will consult with your financial planner, they are looking at one-off transaction, whereas your financial planner is looking at the long term

There is no shortage of jargon in the financial sector, much of which many people may feel has been specifically designed to confuse laypeople. However, this is seldom the case as the industry is highly complex, highly specialised, and where people wade into the waters of the market without the property understanding, knowledge or advice, it can be extremely costly.

There are several key professionals that provide financial advice to you as individual investors, these include your accountant, stockbroker, financial planners and financial advisors.

Investors or “a person who has aggregated net assets of $2.5 million or has aggregated gross income for each of the last two financial years of at least $250,000 a year can be classified as a Sophisticated Investor”^[1] They have a further range of investment specialists that deal in many off-market transactions that have much higher risk/reward variables.

So, when it comes to accountants and financial planners, we will discuss that later in this book, however, there is one area that people are often confused by definition – and rightly so – the difference between financial planners and financial advisors.

As such, we thought it pertinent to provide a definition on both, and how their services can provide you with advice and expertise upon your investment journey.

A financial planner is considered a ‘broad brush’ approach to your financial matters. They are looking at the long term, providing an ongoing service – starting with a financial roadmap - with what should be considered a holistic and comprehensive approach.

A financial planner’s role is to guide you through your ongoing financial journey, providing support and services to iterate your roadmap (financial plan) as life’s challenges present themselves along the way.

A financial advisor, even an independent financial adviser, tends to focus on a single problem. They don’t take into account the big picture. Instead, they look at the question narrowly, only advising you on what you have asked for.^[2]

Advisors focus on how to invest a pool of money – such as an inheritance, windfall or other financial benefits, into a product as a one-off transactional approach. Within the narrow focus, they are looking for financial products – such as a real estate fund – that may not be available on the retail markets, but provide a solution to your short term need – ie: establishing 15% p.a returns on an investment of $250,000 over a maturity period of 3-years.

While a financial advisor will consult with your financial planner, they are looking at one-off transactions, whereas your financial planner is looking at the long term. It is also true that many financial advisors have regular communications with financial planners, so they are aware of the suite of products the advisor may have available at any given time.

The key differentiator is, however, a financial planner is long term and holistic, whereas a financial advisor is a short term and one-off. Both are required at different stages of your investing career; however, it is an important distinction on who is responsible for what and why in this your financial journey.

[1] https://www.morgans.com.au/private-clients/Sophisticated-Investor-Panel

[2] https://frazerjames.co.uk/financial-advisor-financial-planner-the-difference/

A certified financial planner (CFP) is a designation that is recognised in 27 territories around the world, and is the standard of excellence when it comes to financial planning 

Although there are now – in large part thanks to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – far more stringent guidelines around financial planning and the financial services industry than ever before, there is a need as a consumer of any service to undertake some due diligence.

Just like every chef, doctor, mechanic, or accounting professional are not created equally, nor are financial planners. However, thanks to certification standards, industry governance bodies, government regulatory bodies (such as APRA and ASIC), the professionals in the financial industry are being held to a higher standard than ever before.

What is the standard in financial planning in Australia?

According to the Financial Planning Association of Australia (FPA) “For more than 30 years, the Certified Financial Planner® certification has been the standard of excellence for financial planners. CFP professionals have met extensive training and experience requirements and commit to the highest ethical standards that require them to put their clients’ interests first. 

The CFP® designation is fast becoming the first choice for clients and employers – and it’s easy to see why. The highest designation in financial planning, coupled with commitment to the highest ethical standards, sets CFP® professionals apart from the rest.”^[1]

What does the CFP standard provide for a client?

When you engage a financial planner with the CFP certification, you should expect an extremely high level of care, industry best practice skills and expert service.

This is in large part thanks to the high degree of CPD or ‘compulsory professional development’ that is expected of members, the minimum entry requirements and the industry professional standards that govern them as individuals – both professionally and personally.

Although this may sound somewhat dramatic, in the wake of the activities by many financial planners prior to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, many practices that wouldn’t stand up to the ‘pub test’ were routinely rolled out by many so-called professionals in the industry.

For a CFP to achieve the certification and accreditation, they must adhere to not only industry best practice, but be leaders within the industry.

As a client, you can be rest assured that when your financial planner is a CFP, they will be held more accountable, as the CFP accreditation holds them to that standard, but also brings them business and allows them to charge the applicable fees.

What happens if I am not happy with my CFP?

If you are not happy with the performance of your CFP, and you feel they have acted inappropriately or recommended products or services outside your risk tolerance, or potentially provided false or misleading information – then you have yet another avenue for restitution when they are a CFP.

However, it isn’t all about doom and gloom, quite the contrary, a CFP is an industry professional, one that has worked extremely hard to not only be recognised by their industry as a top practitioner, but has to ensure their skills – both technical and interpersonal – are developed each and every year to better service you as a client. So, next time you speak to your financial planner, ask if they are a CFP, if not, why not?

[1] https://fpa.com.au/education/cfp-certification/

There is a vast array of expertise, training, qualification and ongoing development

that is required to become, and remain a financial planner  

There are many different business professionals offering almost as many services in today’s personal finance world. When it comes to financial planning, as could (and should) be expected there is a vast array of expertise, training, qualification and ongoing development that is required for qualified financial planners not only in Australia, but across the world.

A financial planner has several core duties:

• Analysing and understanding a client’s current situation, and actioning, scrutinising and monitoring investments on their behalf
• Making recommendations with regards to investments, superannuation and retirement planning
• Helping clients to manage and invest their money to help them meet their financial objectives.^[1]

Although there were many pathways prior to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there are not far more stringent guidelines to becoming and maintaining your status as a certified financial planner in Australia.

In 2019, new education and training standards were imposed upon all existing and future financial planners and advisors to ensure you as the client receives the very best in advice and service.

According to the ASIC website, in relation to the qualification, exam and professional development of financial planners, existing financial advisers must bring their qualifications up to an approved degree or equivalent level to meet the education requirements.

They must have an approved bachelor’s degree (AQF7 level) or above or equivalent. The maximum requirement is an approved graduate diploma (AQF8 level) comprising eight subjects.

Depending on their current qualifications, an existing financial adviser may only do bridging courses, such as the FASEA Code of Ethics (if it was not included in their qualification).

For new financial advisers, the minimum education requirement is an approved bachelor’s degree (AQF7 level) comprising of 24 subjects, or above or equivalent.

Where a new financial adviser already holds an appropriate qualification, they can meet the education standard by attaining an approved graduate diploma (AQF8 level) comprising eight subjects.^[2]

How is this enforced in financial service firms?

Within a financial services firm, there must be an AFS licence, or Australian Financial Services licence held by one or more senior parties to the business. A business providing financial services must hold an AFS licence.

Your financial planner will need to have a current AFS licence or be a representative of a licensee from the day they start your financial services consultation.

However, ASIC notes that consumers should be aware that the licensing process is a point-in-time assessment of the licensee, not of its owners or employees. Holding an AFS licence does not guarantee the quality of the licensee’s services.^[3] 

Why is the education level of a financial planner important?

Seeing that holding the licence “does not guarantee the probity or quality of the licensee’s services,”^[4], it is vital that consumers know that your financial planner is not just picking ideas from the newspapers and presenting them to you.

Having completed a bachelor’s degree and subsequent post graduate diplomas, your financial planner needs to continue their studies with CPD or compulsory professional development. Within this training they develop their technical and ‘soft skills’ within their profession.

This continuous development ensures that clients have a financial planner that understands the current laws, that is only providing the most up-to-date advice, and that any advice you receive is from someone who has spent the best part of a decade in achieving their qualification to be sitting in front of you.

Although financial planners may differ in their approach, they access to information, their use of tools and technology, you can rest assured that they are qualified to do so when they are a member of the FPA (Financial Planners Association), are a registered CFP (Certified Financial Planner) and are the holder of a FSL ( financial services licensee).

One final recommendation before you commence with any financial planner, is to ask to see their up to date credentials to this effect, thus proving to you through your due diligence that they are certified to plan your financial future.

[1] https://www.seek.com.au/career-advice/role/financial-planner

[2] https://asic.gov.au/for-finance-professionals/afs-licensees/professional-standards-for-financial-advisers/qualification-exam-and-professional-development/

[3] https://asic.gov.au/for-finance-professionals/afs-licensees/

[4] https://asic.gov.au/for-finance-professionals/afs-licensees/

Ask the right questions, hold your financial planners accountable, and ensure you maximise the upside of working with them, and more importantly, them working for you 

When working with a financial planner, there are several key ways individuals can maximise results and take responsibility for your financial future.

Firstly, we need to ensure that you have done your due diligence, investigated your planner and understood your goals and aspirations in terms of finances.

Then comes the important part, honesty. Yep, just like when the doctor asks how many standard drinks you have per week and you say, “oh only a couple of a Saturday night”.

To maximise the upside of working with your financial planner, you need to ensure you are honest, transparent and provide them access to anything they may need.

From access to bank statements, credit card statements, and home loan documents, these professionals are experts in confidentiality, but they are also experts in working out the best personal plans for their clients’ finances when they have all the information.

How to maximise your financial planner and the financial planning process

Now that we have that section out of the way, we have taken the next section straight from the FPA website, on how to maximise getting the most out of your financial planner and the financial planning process.

1. DEFINING THE SCOPE OF ENGAGEMENT

Your financial planner should explain the process they will follow, find out your needs and make sure they can meet them. You can ask them about their background, how they work and how they charge.

2. IDENTIFYING YOUR GOALS

You work with your financial planner to identify your short- and long-term financial goals – this stage serves as a foundation for developing your plan.

3. ASSESSING YOUR FINANCIAL SITUATION

Your financial planner will take a good look at your position – your assets, liabilities, insurance coverage and investment or tax strategies.

4. PREPARING YOUR FINANCIAL PLAN

Your financial planner recommends suitable strategies, products, and services, and answers any questions you have.

5. IMPLEMENTING THE RECOMMENDATIONS

Once you’re ready to go ahead, your financial plan will be put into action. Where appropriate, your financial planner may work with specialist professionals, such as an accountant or solicitor.

6. REVIEWING THE PLAN

Your circumstances, lifestyle and financial goals are likely to change over time, so it’s important that your financial plan is regularly reviewed, to make sure you keep on track.^[1]

As you can see, it is all about being prepared, being clear on your goals, not simply your wants or desires. It is about being realistic, having a plan, engaging the services of a trusted financial planner and conducting regular reviews of that plan.

When it comes financial planning, if you go off-course, that is fine, your financial planner is there to work with you and take things to the next level.

[1] https://fpa.com.au/about-financial-planning/how-it-works/

There are a key set of variables that you want to ensure you have a handle on with your financial planner, to keep them honest and accountable 

Like with anything, we all enjoy value for our hard-earned money! Be it from a great deal on a new outfit, a discount on your next family holiday, or even 50% off on your favourite items at the local supermarket – it is the feeling of a win.

Not only is it that ‘winning feeling’ but more theoretically, it is the knowledge that your investment in resources (money & time) have been put in the right place to maximise your desired result.

Before we move too far forward, we need to outline some key definitions. Firstly, the use of money can be defined more accurately by the ‘time’ at which you wish to use it.

For example, say you inherit some money from your parents’ estate when they sadly pass, then you and your advisor invest in shares/ stock of an oil producer. By doing this, you are moving your wealth from the present to the future.^[1]

Therefore you ‘invest’ now, to move your wealth from the present to the future. Meanwhile, you may wish to use that money to ‘consume’ now – rendering those same funds null and void should you wish to use them in the future. This is an important distinction for the next section of this chapter.

When choosing to use the services of a financial planner, you are choosing to plan, hence, moving your wealth from the present to the future. However, there are going to be costs that you need to consume for the ‘services’ both now (for the planner’s time) and into the future (trailing commissions, performance commissions etc) depending on the type of services and investments you choose.

So, what are the key metrics by which you should measure your financial planner?

As a client of a financial planner, it is often hard to look past the ‘bottom line’ or in other words how much money you made this year vs. last year.

In addition, it is often difficult to ignore the often-dramatised success of people investing in speculative or high-risk instruments – which in many cases is no different to putting your money into the casino!

Here is what to look out for when you want to measure up your financial planner:

1. Past Performance

You may have heard the term “past performance is not an indication of any future returns” and this most certainly is the case. However, if you are looking for a capable financial planner, you most certainly want to deal with one that has a history of delivering returns – ideally superior returns to just putting your investment in a bank term deposit or managed fund.

Ask for a review of the past 5, 10 or even 20 years performance if your financial planner has been around for that long, and take a look at what they have delivered for their clients.

If you are already engaged with your financial planner, it is key that you again look at the past performance, how your money has tracked in the short, medium and long term vs the plan you sat down and created together at the start of the financial year or your engagement with the planner.

If there are deviations, they need to be worked through, strategies iterated and plans updated to ensure that your financial goals and objectives are being met, or better yet, exceeded.

2. Planning

We all understand that things don’t always go to plan, nor is it always wise to stick 100% to the program. As a client, your financial planner should have a handle on your accounts, on opportunities that could be appropriate, but also if things are not going as planned - they should have a way to get things back on track.

Implementing hedging, divesting some investments and moving them into different asset classes when required is one of the key features you should be looking for in a financial planner.

You should always measure your financial planner on what is coming next, not just what has happened in the past. What are their plans for your money? What are their plans to increase your wealth and enable you to enjoy your future with financial security? If they can’t answer that, even if your performance is outstanding, then you have some serious questions to ask.

3. Transparency

One of the key elements to consider around performance and measuring is not just what your financial planner is saying, but what they are not saying. You need to take a look into your statements, into their marketing materials, their product disclosure statements and ask several key questions:

1. Are the returns in my portfolio clearly displayed and easy to understand?
2. Are my returns compared to applicable benchmarks?
3. Is my broker or advisor willing to walk me through any aspect of the performance that I don't understand?
4. Are my returns beating their benchmarks?^[2]

If you are answering no to any of these key questions, then it is time to have ‘the hard talk’ with your financial planner to ensure you are getting the right advice, not off the shelf service.

4. Accountability

In addition to this, your financial planner should exercise accountability in relation to investment vehicles, funds or instruments they direct or advise you to invest in. For example, if your financial planner has a retail fund – such as a property investment opportunity with 15% returns p.a over 5 years, that may sound great, and it may fit into your risk tolerance, however, has your financial planner invested their own money in the funds?

There is no better way to keep them honest and accountable to what they are recommending you to invest in, than by ensuring they are investing in that same product themselves.

In summary…

Although it may seem obvious, the first KPI (key performance indicator) that you should be looking at as a measure of your financial planner's performance is the financials. How much has been made/lost? Has the plan that was formulated at the start of your planning process been stuck to? If not, why and were you informed?

In terms of your performance were you over what you expected, if so is your portfolio investing in assets that are above your risk tolerance? Conversely, if you are not achieving the benchmarks, is your portfolio investing in the right products? Is your planner too conservative? These are all questions you should be asking.

Then you need to ensure that they are being transparent in their reporting to you, honest about the performance of potentially underperforming assets or potential bad investment choices. By doing this, they are being accountable, which is paramount to ensure your financial future.

Remember, that this is your money, your future, and your path, although your financial planner is acting as a ‘tour guide’ of sorts, you should not feel out of your depth with any of your investments. You should feel that you are getting value for money, good service and honest people acting on your behalf.

[1] McMillan et. El (2011) Investments: Principles of Portfolio and Equity Analysis, CFA Institute, Wiley & Sons, NJ, USA, P.3

[2] https://www.fool.com/investing/general/2012/05/11/how-to-assess-your-financial-advisors-performance.aspx

If you have ever heard the adage “You have to spend money to make money”? When it comes to your Financial Planner, nothing more is closer to the truth.

“For many Australians, one of the big barriers to getting financial advice is the cost. In 2019, ASIC research found that 41% of Australians intended to get financial advice in the future. Despite this, 35% of respondents said one reason they did not or might not get advice was because they thought it was too expensive.”^[1]

Although, this may be the case, like with people planning their superannuation and where they go (yes, that is also a function that you Financial Planner can do for you both through selection of super funds or SMSF, but more on that later), if you select the wrong plan or investment type, then over time this could cost you tens of thousands, even more!

While financial planning may be considered outside the budget of many Australians, giving up a couple of dinners out each quarter to cover the cost may be one of the most impactful and positive changes to your lifestyle you could ever imagine.

There are many elements to financial planning, and we will outline the initial and potential ongoing costs, then also the types of billing often undertaken by the industry.

It should also be noted that post the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there have been dramatic changes to ongoing, grandfathered and rolling commissions that were being paid for planners and advisors, ensuring that the industry provides a more level playing field and recommend the ‘right’ products to clients, not just those that have the largest ongoing payday.

So, how much should Financial Planning cost?

As outlined in previous chapters, with financial planning you need to look at your future, like a business would, and set up a business plan or a financial plan.

This detailed roadmap will typically cost between $2000 and $3000 from most planners, as there is a comprehensive review of your current situation, goal setting, gap analysis then a full review of the services and products that could assist in closing the gap between where you are and where you want to get to.

According to research by Investment Trends, on average you’ll be charged $2,250 in up-front fees the first time you see a planner. Younger clients (under 45) tend to pay half of what older clients pay on average ($1,200 vs. $2,600). This is because younger clients tend to have less wealth accumulated and require less complex advice.

Then when you continue your relationship with a planner, the average ongoing advice fees are approximately $3,450 per annum.^[2] This continuation is almost as important as the plan, if not more-so.

The reason you need ongoing, meaningful support is to ensure that your plan stays on track, or iterates to support your new goals, objectives or circumstances. For example, you may come into some inheritance that you didn’t expect, you may lose a high paying job or you secure an opportunity to retire earlier.

Sure, financial planners can help you make money, save money, invest money and even get that boat or holiday home, pay your mortgage off sooner, all of which is incredible. More importantly, the small cost in the overall scheme of your income and expenses is that you are getting set up for your future.

[1] https://www.canstar.com.au/superannuation/financial-advisor-fees-cost/

[2] https://fpa.com.au/news/much-cost-see-financial-planner/