With the rules prohibiting super funds from giving financial advice about to be relaxed, is it still worth-while engaging a financial planner ?
One of the big problems in the financial advice industry is that there’s no clear and obvious set of guidelines explaining what good financial advice looks like and how much it should cost.
Technically, good comprehensive financial advice will include a detailed look at your personal cash flow, how the identified lump-sum outlays will be funded, Centrelink benefits, concessions, tax strategies, superannuation strategies, aged care issues and finally, what happens to your estate when you die.
Yes, investments are part of the process but the strategies, tricks and “how-to-do-it” are where the real value is added.
Apart from the actual out-of-pocket costs, poor or inadequate financial advice can see you paying more tax than you need to, missing out on savings and benefits or worse still, being shoved into investments that might be expensive and poor-performing.
You start the process by choosing the “financial advice” option from the moneysmart.gov.au website. 20 minutes here will explain how the process works and the various players in the industry.
Next, you can visit the two main industry association websites to get the names of potential advisers.
The Financial Advice Association of Australia at faaa.au is by far the largest and members are in the main, advisers who work for the financial institutions, super funds or financial advice firms they own. Most FAAA members are qualified, competent, good financial planners.
Certified Independent Financial Advisers Association (at cifaa.asn.au) members are all of the above but legally barred from receiving incentives or commissions of any type or having any links to products. Most charge flat-fees and argue that this removes any real or potential conflicts. Disclosure required. Yours truly is tied up with CIFAA.
After locating an adviser or being referred by a friend or colleague, your journey with a planner might start with an initial meeting. You’ll also get a sense from this meeting whether the adviser is a good fit and is able to help you now, or perhaps later, when things get more complicated. The best advisers will make that call for you. They’ll tell you that you don’t need ongoing advice right now and why.
You might also discover that after that meeting, it is “all too much” and it’s obvious that you need assistance. You might then elect to go to the next step, which is to receive personal financial advice. This is delivered in a formal, legally required document called a Statement of Advice. The information collected at the initial session will form the basis of the document.
Personal financial advice means you are given specific instructions and actions to follow. It’s like getting the detailed engineering drawings to build a new home.
Costs for a detailed SOA will typically cost upwards of $3500. That’s because most plans with detailed calculations and projections typically take between eight and 15 hours to produce.
Above all, you should be able to see and understand exactly how the plan will work. Be wary of the financial adviser that only seems interested in managing the money, perhaps by setting up a self-managed fund, when there’s no obvious benefit to you.
Lastly, you may elect to engage the adviser on an ongoing retainer basis. These days, these costs can range from about $5000 a year and up.
For that you would expect ongoing supervision of just about everything — from helping you with tax to updating Centrelink and providing detailed answers to any questions you have, whenever they arise.
There should be at the very least one or two face-to-face meetings a year and possibly more if you are in a transitory period, all included in the price.
Nick Bruining, The West Australian.
