What it is not?
Lately I’ve been speaking with a lot of folks who are experiencing the same problem.
They are looking for good advice…they want good advice…happy to pay for good advice.
But everytime they speak with someone they spend their time trying to convince them to buy a product or invest a certain way…
Leaving them more frustrated and confused than ever.
Oh boy, this is so old school…haven’t these financial planners learnt anything over the last 20 yrs…
It’s like going to a doctor. Telling them you have a problem and without a proper examination. Prescribing medication that may not even fix the problem or make it worse.
Others tell you you can achieve better investment returns than the investment market itself. It’s all an illusion to prey on your need for a dopamine hit.
It might be fun, but for the majority of people they’d be better off in index funds. Not exciting but it works…
Product is something the financial services industry has been known for. Financial Planners masked as salespeople for the financial services companies they worked for.
It’s the least important part…
I’d go as far to say it doesn’t matter that much. One type of product may be perfect for one person and a disaster for the other.
REAL financial advice is not product focussed…
What is REAL financial advice?
On the one hand you have personal capital.
Income…investments…super…time…energy and attention.
On the other hand you have things that are important to you…
It could be:
- Spending months in a caravan traveling Australian in the winter
- Creating memorable experiences with grandchildren
- Maintaining your health
- Starting a new hobby
- More time to pursue your passions
- Exploring dream destinations
- Giving back to the community
To name a few…
Real financial planning is the alignment of those two. The personal capital you have and what’s important to you.
For most of us, there’s a gap between the two…most of the time.
It’s the continual alignment of your use of capital with what’s important to you.
In other words it’s how you manage your financial resources with what you say is important to you…
Before you get tactical…looking at the product…the investment you use, you’ve got to understand why you’re doing it.
The right answer…
A REAL financial planner will tell you the best investment portfolio, the best way to structure your financial resources that gives you the greatest chance of achieving what’s important to you.
Minus the risk of your plan blowing up…
A guide in a constantly changing landscape…
Many folks think that having a financial plan is the main game. You do it once and that it’s…it’s where the value lies.
I totally understand that because the focus has always been on the plan. A document (called a Statement of Advice) that spans many pages which most people don’t read.
It’s an important start…you need to know where you’re heading.
But here’s the thing, no one knows what tomorrow is going to hold let alone how the next 30 years is going to pan out.
You only have to go as far as March 2000 when COVID changed the way we lived our lives forever.
What were your plans in January 2000?
How did they change?
We had clients overseas, in the middle of their bucket list holidays. Only to find themselves scrambling before international borders shut.
Retirement’s postponed due international travel being shut down.
Dream holidays cancelled.
The fear of the unknown as investment markets plummeted…
Real financial planning is a complex problem.
It’s a complex adaptive system that’s constantly adapting and course correcting.
Real financial planning is all about helping you make really good decisions with incomplete information.
The value of real financial planning is in the ongoing advice…
You can have a good map that sets out your journey ahead.
But the value of real financial planning is having a guide with a really good map to help you navigate the changing landscape…
Imagine you have a map about the territory you’re about to embark on. You go out there without a guide. But the first day you embark on that journey your map doesn’t represent the landscape on the map.
You’re lost and confused…
I’d go as far to say your plan is useless without the ongoing process of planning.
It doesn’t represent the future…
Your life…investment markets…legislation…employment…health…economy…financial goals and family situation changes.
That’s the landscape you’re faced with. It’s constantly changing.
The importance of real financial planning is the ability to make course corrections and make important decisions when it matters.
It’s the small decisions compounded over time which makes huge differences to your life…
Why do retirement plans blow up?
More often than not it comes down to behaviour…
Reacting to market falls because you think you’re going to lose everything…
Letting greed takeover…
Trying to time investment markets…
Not sticking to the plan…
Not implementing your plans…
It’s the human side…the tricks we play…then falling prey to confirmation bias and recency bias.
The hurdles are endless…it’s like thinking you can turn up to a gun fight with a knife and win.
The cards are stacked against you…then you have the maths equation.
What if the financial planner tells you you’re doing it all right?
That’s great news…now you know.
For the majority of clients who come to us, they are about 80% there. They’ve done a good job already.
I see our role as a real financial planner is to help clients square up the other 20%. It’s the 20% that’s going to make the difference.
To help clients tweak around the edges. But primarily our role as a real financial planner is to help clients avoid costly mistakes from here all the way through retirement.
It’s the costly mistakes you want to avoid. You can’t afford to make them as you approach and transition to retirement.
Examples of costly mistakes:
- A client who came to us after purchasing investment properties 5 yrs out from retirement. When they came to us 5 yrs later, the properties had dropped in value by $250k. After working through their plan, they would have been fine had they not invested into them. Their retirement nest egg was $250k less than where it should have been.
- A couple who got spooked by the Covid market meltdown. Rightly, they were concerned about seeing their life savings fall day by day. By the time they came to see us, it was over 12 months later and it was a mistake to the tune of hundreds of thousands of dollars.
- A couple who had been working with an adviser. They were only an investment guy. They’d missed thousands of dollars of opportunities by not taking advantage of valuable super contribution opportunities.
- BIG BLIND SPOT – a couple suffering from overconfidence. Around 90% of their portfolio was in shares. One BIG market correction and they’d be wiped out.
All costly mistakes which could have been avoided by working with a real financial planner.
You should be happy if you find a real financial planner that tells you you’re doing it right. They’ll help you pour fuel on what you’re doing right and identify blind spots you’re not aware of.
Acting in your best interests?
A financial planner is required by law to act in your best interests. To put your interests before their own.
This was not always the way in the past. It’s the reason there was a Royal Commission on the financial planning sector.
What to look out for?
As with any decision you make, you need to be comfortable with the person you are speaking to.
I liken it to the beer test…would you sit down and have a beer or glass of wine at the pub with this person.
While there have been significant changes within the financial planning industry. It’s a heavily regulated profession.
You need to do your homework…
Unfortunately there are still conflicts that exist so don’t be afraid to ask.
- Benefiting from the product they use – I recently came across a couple who had their accountant/financial planner recommend a new product. I was a little curious as to why…so we did some investigations. They were licenced through one of the big banks. We found the more products they placed their clients in that were bank owned.The resale value of their business went up. Add to that the use of the bank’s investments and the resale value went up further. Not exactly in the best interest of their client.
- Owning the product they recommend – a recent high profile case of this is Dixon Advisory. Lauded as a reputable financial advice business. As a client you would pay a fee for the advice. If you were recommended a Self Managed Super Fund, they’d receive the fee for that. If they recommended investments they managed, they’d receive a fee for that too.
Now they are in administration…
The moral of the story is to ask questions. Ask what other financial or business benefits the financial planner receives from the advice.
There should be none…
What do they specialise in?
It’s important to understand what the financial planner’s specialty is:
- Generalist financial planner – will have clients of all ages ranging from working couples to business owners to pre-retirees and retirees.
- Specialist financial planner – will focus on a very specific area. For instance we specialise in helping people within 10 years of retirement plan a successful retirement. Others will focus on young couples, business owners or entrepreneurs to name few.
It’s important to ask the financial planner what advice they specialise in and determine if it’s a right fit for you.
How does a financial planner charge?
With new regulations being introduced in the financial planning profession. Advice is not cheap.
Great advice is worth it both financially and for peace of mind.
- Fixed fees – this is my preferred way of paying for advice. The financial planner charges a flat fixed fee for the service received. You know what it is upfront and what advice and services you’ll receive for that advice. The more complex your situation, the more the fee will be.
- Percentage based fees – this is where the financial planner will charge a percentage based on the amount of money you have invested. Got to say, I’m not a fan of this approach. The reasoning put forward by the financial planner is their interests are aligned with your interest. The market goes up…you all benefit…the market goes down…they share in the pain. Last time I looked, no one has control over investment markets…
Not sure how you can base your fee on something you have no control over…I’ll leave that one there.
However you are charged, you need to feel comfortable with it.
Any advice you receive should put you in a better financial position providing both tangible and non-tangible benefits.
Our approach to advice fees is different…
We charge a flat fixed fee based on the phases our clients go through. Some just want a retirement roadmap and we charge a flat fixed fee for that.
There are many who want that ongoing support and guidance along their retirement journey. We charge a flat fixed fee for that.
At every phase, it’s our clients who are choosing what they need…
Helping people within 10 years of retirement achieve a successful retirement…
For just over two decades I’ve been helping clients plan and live a successful retirement.
Avoiding the costly mistakes many make through this journey…
Our process is built on over two decades of experience working with pre-retirees and retirees.
We bring that expertise so people can safely navigate their retirement journey…
- Financial x-ray – if you go and see a doctor with a medical issue. They’ll generally run some tests prior to writing out a prescription. It’s no different when it comes to planning your retirement. We’ll start with full financial X-ray. Discuss what your retirement plans are. What your cashflow requirements are. Discuss your current concerns and identify any GAPS you might not be aware of.
- Retirement Roadmap – this is where we start to build your retirement roadmap. We will help you with your priorities. The decisions you need to make. Identify all the options and create your retirement roadmap.
- Implementation/Retirement Guide – while some decide they’ll go off and implement the recommendations themselves. Other’s want our help and expertise to help implement the recommendations. This is where we meet regularly through the year to forward plan. To adjust the plan as the landscape becomes clearer.
You have to feel comfortable with the financial planner you work with…
No matter who you choose. You need to feel comfortable with the financial planner you work with. This relationship can last a couple of decades quite easily.
The advice will ebb and flow as your evolves.
A REAL financial planner will help you navigate the most stressful times in your life. Retirement…market collapses and ill health to name a few.
We’ve got clients who have followed me through various business. We’ve helped them navigate their retirement. We’ve helped them with inheritances.
For some, we are now working with their children and their health has declined later in life and can no longer make financial decisions.
A REAL financial will be there to bring perspective and guidance when you need it most.
Need some help putting your retirement roadmap together?
If you’d like some help putting your retirement roadmap together, let’s have a chat. Request a call emailing me at firstname.lastname@example.org or request a call here…
We’ll discuss your retirement challenges and questions where you’ll gain clarity on your next steps. If requested, we’ll walk you through the three phases we use with clients to build your retirement road map. So you can retire with more confidence and clarity than ever before.
Glenn Doherty – CFP – Financial Planner | Helping people within 10 years of retirement achieve a successful retirement