Firstly it is important to understand why financial planners are useful. A lot of people don’t quite understand what a financial planner does and why they serve a purpose these days with the numerous investing and money decisions that are able to be done online.
A financial planner will help you with investment advice and carry out the work required for you to invest your money, normally on your behalf. This is why it is important to know you trust your financial advisor and that they are skilled at what they do.
The often also handle your ongoing paperwork that is required when investing in different industries and schemes. Financial planners/advisors should also be able to give you advice on wealth creation and the future goal of retirement planning.
Although they will have an understanding of saving money on tax, they should really tell you to discuss that separately with your accountant.
Your financial planner must be able to provide:
- A financial services guide
- A statement of advice
- A product disclosure statement
Ensuring that you are provided with the above will give you a greater understanding of how they operate and whether or not they suite your requirements.
It is also worthy to note that most major banks offer free financial planning and advice.
You should remember however that these advisors are likely to push products and services offered by their institution and often receive commissions for doing so.
Methods that financial advisors make money:
There are two options that are commonly used by financial planners and advisors when it comes to them making money.
- Commission from the products they push
- Set fees and charges based upon services offered
It would seem that the commission structure would likely save you more money, but often the set fee financial planners are more cost effective as they will refund you the commissions as part of your agreement. Be sure to ask about this when talking to them.
Things to look out for when picking a financial planner:
- Failing to provide how their strategy was created specifically for you and how it will benefit you.
- Failing to provide a financial services guide, statement of advice and a product disclosure.
- Ensure that they make sense and you understand their proposed strategy. Who cares if you look like an idiot.
- Ignoring your key requirements and initial requests.
- Failing to explain why the suggest higher fee options over smaller fee options.
- Asking you to switch investment schemes constantly, this could be for ongoing commissions.
Finding your financial planner
The financial planning association of Australia is a regulated body that ensures all listed advisors adhere to strict guidelines.
You can contact them at: Financial Planning Association, known as FPA.
Some planners will charge you to draw up your initial plan, which is normally less than ideal because it makes it hard for you to compare planners without costings an arm and a leg.
Are you ready for a financial planner?
You don’t need huge sums of money to see a financial advisor. The general rule of thumb is that you need to be able to commit a certain amount each month and you will be fine. Financial planners are looking to see that you are serious and willing to commit a certain portion of your monthly salary to their plan for you. It will add up a lot quicker that way pending they make the right decisions for you.
Some people assume that financial advisors and planners are able to help you get out of debt. This is not normally the case as debt/credit counselors are normally the best way forward in that situation. Financial planning is normally for people who can set aside surplus cash in order to invest.
A quick checklist of what you should do before seeing a financial planner:
- List all of your assets
- List all of your liabilities
- Print out your bank statements for 3 months, super statements and all other accounts
- List your goals
- List your retirement goals
- Think about how risk adverse you are, are you low, medium or high?
Through utilising the above information, you should be able to understand whether a financial advisor is right for you and what the benefit is they can bring to the table.
Choosing the right financial planner is hard, they are technically responsible for your money and its safety so it is vital to know that they are licensed and that you trust them.
Tell us your tips for choosing the right financial advisor or planner
This article is merely a small piece when it comes to making such a big decision. Drop a comment below to share your tips!