There are many reasons that people seek advice from a financial planner. Financial advice can be useful at turning points in your life, like when you're starting a family, being retrenched, planning for retirement or managing an inheritance.[1]
The key is that you, as the client, understand fully what is on offer, what is being suggested and most importantly don’t sign off on anything unless you are completely comfortable.
There are a wide array of things in which a financial planner can assist, depending on your financial position, age and risk tolerance.
Setting your financial plan (roadmap)
One of the most important functions that a financial planner can assist you with is setting your financial goals and plan in place. Known as a roadmap, this will assist you in working out how much you need to be comfortable, how much you can invest, borrow or save and how to set up a diversified portfolio so you can be prepared for the unexpected.
A financial planner is qualified and skilled at reviewing and understanding your personal circumstance, and recommending instruments that can assist you in building wealth, getting out of debt and increasing your quality of life.
This is not to say you will be taking baths filled with money, it is more about setting realistic expectations of what you can do, then showing you how, where and when to do it.
Investing
Investing is not just a mechanism for those wealthy few among us. You can in many instances invest as little as a few hundred dollars in ASX listed shares – on brokers such as IG Markets – or even invest in property or part of a property for as little as $100 per brick – Brick-X.
A financial planner can help you save to invest, invest money you may have come across as a windfall from work or a family gift, not to mention recommend more complex instruments such as listed funds, property funds and alternative investments should they be appropriate and fit within the objectives of your financial plan.
Constantly undertaking CPD (compulsory professional development), financial planners are up to date with all the latest investment vehicles, and can also prevent you from investing blindly in speculative fads – such as cryptocurrency, without the proper guidance and warnings of potential losses.
Setting you up for retirement
If you are under 50, you seldom think of your retirement. Sure, you may have superannuation – but is this going to be enough to continue to enjoy your standard of living?
Financial planners are experts in working with retirement planning. From setting up self-managed superannuation funds (SMSF), passive investments that make money while you sleep – such as investment portfolios, property etc – or simply showing you how much money you will need in both assets and cash to comfortably retire.
In many instances, people meet with financial planners too late and feel as though they are scrambling to get everything done. The key is setting up the financial plan/roadmap as early as possible.
Saving for children
Children cost money; it is as simple as that, with estimates ranging from $159,120 up to $548,500 over 18 years[2] - and this is before you may want to send them to private schools!
Your financial planner can work with you to set up education plans with small weekly or monthly contributions.
You may need a bigger house or a new car - all of these can be proactively built into your financial plan as an iteration. Saving for children will allow you to continue to enjoy the things you love doing, but ensuring your children have the best in life – without you having to go out and work more hours, or get a second job to pay for their needs.
Estate Planning
A topic that most of us don’t love talking about, but it is vital especially if you have a partner, children and /or financial investments. Regardless of your personal circumstances, estate planning is important because it helps to ensure you are looked after during your lifetime according to your wishes and that on your death your assets will be managed and transferred according to your wishes, in the most financially efficient and tax-effective way[3].
Your financial planner can ensure you have adequate levels of life insurance should anything happen to you, so your family is not left holding large debt and no way to pay them. They can also ensure that your final will and testament is set up in a way that those you love receive what you had intended.
Although a lawyer needs to write up and sign off, your financial planner is a vital part of this process.
Putting debt to work
Not all debt is bad debt – this is true! Your financial planner is able to educate clients on the difference between good and bad debt, plus ensure the debt is structured in the best way possible.
Good debt has the potential to increase your net worth or enhance your life in an important way. Bad debt involves borrowing money to purchase rapidly depreciating assets or only for the purpose of consumption.[4]
Bad debt would be categorised as:
While good debt is:
When it comes to debt, it is important to have an understanding of what debt it is important for you to have to grow your quality of life versus that which just promotes your consumption or short term gratification of a need or want. A good financial planner can assist you with this, and ensure you are not taking on more than you can handle.
There are many areas in which a financial planner can assist you, and this is by no means an exhaustive list, but it is important to note that your personal circumstances will dictate what a financial planner can provide you, when and how.
As your financial situation strengthens due to sticking with the plan, just like a good book you will be presented more options, investment vehicles and potential revenue making ideas for you to minimise your expenses, maximise your financial position and enjoy your life to its maximum.
[1] https://moneysmart.gov.au/financial-advice/working-with-a-financial-adviser
[2] https://www.finder.com.au/life-insurance-and-the-cost-of-raising-children
[3] https://www.aetlimited.com.au/__data/assets/pdf_file/0011/223121/Your_guide_to_estate_planning_brochure_2014_v3.pdf
[4] https://www.investopedia.com/articles/pf/12/good-debt-bad-debt.asp
[5] https://assurewealth.com.au/15-ways-a-financial-planner-can-help-you/