An appointment with a financial planner doesn’t have to be scary. Here’s what you need to know.
In a good meeting, you can count on being the one doing most of the talking while being reminded that it’s your money, and your decision.
As is so often the case, we fear what we don’t know. It can be a daunting task to muster up the courage to finally face our finances head-on and make the decision to meet with a financial planner. Many of us don’t know what to expect and find our self asking questions such as, “What should I know before speaking to a planner or advisor? What should I bring? What kinds of questions will they ask me?”
While the nature of every meeting is unique, as the needs of every client will vary, here’s a typical outline of what your conversation with a financial planner may look like:
Before we can figure out where we’re going, we need to determine where we are today. You would never attempt to give a friend directions if you didn’t know where they were coming from. Much the same with your financial plan; your planner can’t help guide you until he or she knows the starting point. You’ll discuss your current assets that may include a savings account, checking account as well as any superannuation you have through current or former employers. It’s also important to review any debt that you may be carrying. This may include credit cards, student loans, car loans or perhaps a mortgage. Your adviser will also consider any existing life insurance cover you hold as mitigating risk an important part of planning.
Cash flow analysis
Once a baseline has been established for your assets and your liabilities, it’s time to assess your monthly cash flow. This is a fancy way of saying you’re going to discuss how much money you make every month, how much you spend each month, and how much you are saving. Your planner is getting an understanding of how much you have available to reasonably save and invest on a monthly basis. This is a great time to discuss where you would like to cut back on certain expenses. Whether you’re spending too much on happy hours, expensive dinners, or shopping at your favorite boutiques and department stores, we all have areas where we can cut back on spending.
Now that we know where we stand financially and how much we have available to invest each month, we need to figure out what we’re doing with those savings. This is how you know your advisor is focused on helping you meet your objectives because this is where you’ll be asked questions like, “What are your goals? What are you hoping to achieve? What’s most important to you?” To help you put together an investment plan, your planner needs to know when you plan on needing that money. Are you hoping to buy a house in the next three to five years? Are you saving to afford a big vacation every year? Are you trying to pay off your debt? Are you planning to put away funds to cover unforeseen expenses in an emergency savings account? Are you looking to start saving for your retirement? By prioritizing your goals, your planner can help put a plan in place that is intended to help get you there.
Based on the information that you’ve shared, your planner will discuss with you some preliminary thoughts and ideas around your expressed ideas and goals. Topics touched on could include Investment Risk and Return, Saving (both inside and outside of Superannuation), Insurance, Centrelink and other discussion points to help you both understand the best course for you. It is important after all to be sure that your plan aligns with your goals, time horizon and risk tolerance. Reviewing all factors enables you both to make educated, informed decisions.
At the end of the meeting, you’ll have the beginnings of a plan that outlines how much you wish to be saving each month, what those savings are for, where you would like them invested and why. You’ll have a strong grasp of where you are financially, where you want to go, and how you’re planning on getting there. It’s important to remember that you are the decision-maker and your planner is there to help guide you on your journey to reaching your goals.
You can count on being asked a lot of questions. In a good meeting, you can count on being the one doing most of the talking while being reminded that it’s your money, and your decision. Most importantly, you can count on leaving the meeting with a personalized outline designed specifically to help you reach your goals.
Even positive experiences might necessitate some professional help.
Sometimes, even the best events in life – a birth, new job or dream relocation – require a financial plan. They might necessitate the need for more insurance coverage, a new budget or guidance from a financial advisor.
Here are 6 positive events that should inspire you to do some financial planning:
1. You retire.
Retirement is considered the pivotal financial moment in a person’s life. If you haven’t already worked with a financial planner to figure out your plans and budget, then now is the time. In fact, at Power2 we urge even clients in their 20s and 30s to start planning for this major life transition, to make sure they’re saving enough along the way, during their peak earning years. It’s also a good time to reflect on what you want out of the final third of life.
2. The opportunity to buy a Holiday Home / Rental Property.
Beach houses and holiday homes are a great annual escape from everyday life. Then, the landlord offers a sweet insider price you can’t refuse. Likewise a rental property can seem like a great idea, tax deductions and an investment you can visit and touch. While they can be a great investment for some, rentals and holiday houses, especially ones that require rental income to finance – can be a complicated long-term commitment. A Power2 financial planner, not a real estate agent, is the adviser to help you objectively consider this decision.
3. You got a pay rise.
Pay raises are typically small and incremental if they come at all, so getting a big raise is cause for celebration. They also mean it’s time to do some planning to determine how much you should be saving for the future. It might be time to consider bumping up your retirement savings through strategies such as Salary Sacrifice.
4. You just got an inheritance.
Baby boomers stand to inherit significant wealth in the coming years, and receiving lump sums also carries with it financial responsibility. It can raise questions about spending habits, charitable contributions, tax payments and a slew of other concerns. You might want to get help from a Power2 Financial professional as you figure out how to handle the money.
5. Wedding bells are ringing.
Marriage is often the start of a long journey with many major shared life events like children, travel, loans, business and eventually retirement. A good financial planner will take that journey with you, scouting ahead to be sure you take advantage of every opportunity and avoid life’s traps.
6. You’re expecting a new arrival in the family.
When the baby arrives, life inevitably gets more complicated. It could be worth it to fit in some financial planning alongside baby naming or stroller shopping. You might want to start planning around future debts such as housing, cars and schooling as well as take out additional life insurance policies.
The stakes are high when you open your finances to a planner, so don’t skimp on your homework.
Do your due diligence
Choosing the right Financial Planner is vitally important to your financial well-being. This is someone you will trust with your investments, which makes it a high-stakes decision. Do you know what qualifications to screen for or which questions to ask? The Financial Planning Association of Australia is a great place to start your search.
Power2 is an FPA Professional Practice and all planners are members and signatories to their code of conduct.
How do you make sense of the alphabet soup in Financial Planner designations? Do your homework, and find out which titles, such as Certified Financial Planner, offer the kind of expertise you’re looking for. Many designations sound impressive, but they don’t require more than a couple of two-hour classes.
Power2’s Certified Financial Planner and Associates all hold university degrees along with post graduate Financial Planning studies.
Check the Planners history
You would hate to open up your finances to a Financial Planner you later learn has a history of skirting the law. Investors should check the Australian Securities and Investments Commission’s (ASIC) website to review an planner’s history as well as finding other helpful advice.
Power2’s experienced Financial Planning team are all proud to offer ethical client focused advice.
How is the Planner licensed
Is this planner qualified to give you financial advice and who holds their licence? Planners can hold their own financial services licence or they may be operating under a large financial institution. If you want to be sure that your adviser is providing you with advice tailored for you and not the interests of some faceless company ask the question!
Power2 holds its own Australian Financial Services Licence (AFSL) meaning we have no links to large financial institutions which can influence our advice.
Ask to see an example of a client report
If you were thinking of hiring a caterer, you’d try the food first, right? Well it also makes sense to see an example of a Financial Planner’s work before hiring him or her. Ask the planner to provide you with an example of a client’s report. To get a better understanding of his/her services, ask the planner to walk you through each line, explaining the rationale behind the asset mix and the results.
At Power2 we would welcome the opportunity to take you through the quality and depth of the advice you will receive.
Find out how the planner is paid
In a perfect world, the way your Financial Planner is compensated wouldn’t affect the quality of advice you receive. But since that’s not a reality, investors must understand how money motivates planners. Planners must put clients’ interests above their own and their recommendations must suit the client’s financial needs, objectives and unique circumstances. Commission payments to planners from third parties can complicate and confuse this relationship.
Power2 receives its fees from you and no one else. We discuss and agree on fees with you upfront and payment can be either directly from you or paid from your investment assets.
Determine if the planner can speak your language
“Organic growth”, “opportunity costs”, “Alpha and Beta funds”. Investment communication is riddled with confusing terms and complicated concepts. It’s your Financial Planner’s job to translate those ideas and terms into language that is both understandable and relevant to your situation. If an planner isn’t willing to break these terms down for you, you may need to keep searching for a better fit.
At Power2 we believe that education is one of the most important things we can offer. The more you know about your financial plan the better prepared you are to take control of your financial future.
Power2’s Financial Planning team in Mackay is led by Derek Fitzgerald. Over the last few years Derek has twice been selected as one of the top 50 financial advisers in Australian by Australian Financial Review Smart Investor magazine after taking part in their annual Master Class exam.
Derek has completed studies at Deakin University to become a Certified Financial Planner and is a Life Risk Specialist through the Australian Financial Planning Association. He also holds a Bachelor of Psychology from James Cook University and a Diploma in Personal Financial Planning from the University of Southern Queensland. Derek is also one of the Partners of the business.
Our Financial Planning Services encompass:
Retirement planning including:
- Salary sacrifice
- Account Based Pensions
- Transition to retirement income streams
- Centrelink and Social Security Planning
- Self Managed Superannuation
Wealth accumulation including:
- Borrowing to invest
- Regular savings plans
- Redundancy planning
- Investment advice (including property)
Life insurances (inside & outside super) including:
- Life cover
- Total and Permanent Disability cover
- Income protection
- Trauma cover
Estate planning advice including:
- Enduring Powers of Attorney
- Disability and Testamentary Trusts
Benjamin Franklin was right on the money when he said: “An investment in knowledge always pays the best interest”.
At Power2, we have the knowledge needed to invest your money responsibly. You can retain complete control, using us as your ongoing sounding board for investment ideas, or ask us to manage your investments for you.
So, whether you want to purchase a rental property, buy some shares, or just find out what investment options would be best for your circumstances, talk to Power2 about an investment strategy that’s right for you today and for the long term.
Can I afford to retire? At what age can I retire? How much do I need to retire
Now I’m retired how long will my money last?
Pondering the above questions are enough to make many of us feel anxious and unprepared. Retirement is a large change and like all significant milestones it requires planning and preparation for it to be a success.
Remember that after retirement Australians will spend on average around another 30 years living on the funds they have saved during their working life.
At Power2 we will help you to manage your finances and expectations on your way to retirement and, just as importantly, out the other side into your new life.
There are some common, yet avoidable mistakes that prevent many people from retiring ‘on time’. But with our help, you can steer clear of the mistakes that could derail your retirement.
Retirement planning tip one: Get Advice
Salary sacrifice – Contribution caps – Transition to retirement income streams – Centrelink Aged Pension – concessional contributions – Self managed super funds – Property – Shares…. The list goes on and on.
None of us have all the answers. We take our car to a mechanic and visit a Doctor if we are unwell. When it comes to planning for retirement we all need a professional who will look at our individual situation and then find the path to retirement that is best for us.
Retirement planning tip two: Understand what you can afford
How much income do you need to maintain your current lifestyle in retirement?’
This is a question most of us get wrong. If we guess too high it seems as though retirement is not an option. If we estimate too little (and this is more likely the case) things could get tough later on; forcing us to make drastic, unwanted decisions when we are less equipped to deal with them.
Keep in mind that, early on retirees spend more on travel, entertainment and eating out. In their later years, health care cost can escalate.
Retirement Planning tip three: Start Saving Now
Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it”.
To have $1 million at age 65, a 25-year-old needs to save $345 per month for 20 years then never save another cent, assuming the investments earn 8% per year over those 40 years. A 45-year-old would need to save $1,698 per month for the next 20 years to reach the same goal.
While other factors may effect the above outcome it is still very clear that the sooner you start saving the better your chance of reaching your retirement goals.
There are many ways to save for retirement. Your Power2 Financial Planner can help you save far more efficiently and tax effectively, helping you reach you goal sooner.
Retirement Planning tip four: Keep your eye on the ball
One certainty in life is change.
Jobs change, children are born or leave home, housing and share markets rise and fall. Even when things are relatively stable in the physical world your own personal expectations and goals may change over time.
It is important that your retirement savings plan is continually updated so that it matches not just your current needs and objectives but also your future goals.
By meeting regularly with a Power2 Financial Planner you can be comforted with the knowledge that you are still on track and working towards a happy and successful retirement.
Superannuation is a way to save for your retirement. The money comes from contributions made into your super fund by
your employer and, ideally, topped up by your own money. Sometimes the government will add to it through co-contributions and the low income super contribution.
Your employer must pay 9.5% of your salary into a super fund. This is called the Super Guarantee and it’s the law. The Super Guarantee will gradually increase to 12% in coming years.
Over the course of your working life, these contributions from your employer add up, or ‘accumulate’. Your super money is also invested by your super fund so it grows over time.
When you retire, you will have money to live off – a nest egg. Super is a lifetime investment that has many benefits.
How can Power2 help?
Just like you go to a mechanic to get your car tuned up, Power2 can do the same with your Super. It is important to check how your Super is doing every now and then to make sure you are on track to achieve your retirement goals.
Power2’s up to date knowledge in this area can also help you to make the most of any possible tax savings, government bonuses and cheaper personal insurance that may be on offer.
Save for your retirement
Start saving for your retirement early. The longer you have to save, the more
chance your savings have to grow. Power2 can help you to determine what you will need in order to retire with an income to suit your lifestyle. You can read more about Retirement Planning here.
Understanding how super works can bring great benefits whether you are just starting out, are close to retirement or have already retired.
For more information contact Power2 or request an appointment for your Super Tune Up here.
Protection for your financial plan!
A financial plan is a powerful thing, but it’s most potent when supported by a solid insurance strategy.
What is the point of personal insurance? Put simply, it can help to smooth out some of the unexpected turbulence that life sometimes encounters, just as motor vehicle insurance can help take the financial shock out of events that can occur on the road.
If you have a financial plan, whether it’s a short or long term one, then your financial journey along life’s road is already mapped out. Serious threats still exist though, particularly in the form of death, illness or injury.
Helping to guard against such threats are three main types of personal insurance – income protection, life insurance and total and permanent disability. But what is the difference between the three? And how can they help to support major life and retirement goals?
If illness or injury leaves you unable to work for a short or long period, the result on current finances and future plans can be serious. An income protection policy can be put in place to help soften the blow, usually offering up to 75% of your current income to be paid to you in place of your regular income.
The replacement income is usually paid monthly,
taking away some of the typical financial stresses during recovery and helping to protect future
Income protection policies cab be highly personalised, including lower premiums for longer waiting periods (replacement income does not kick in until six weeks after disablement, for instance), longer or shorter benefit periods, and either a pre-agreed payout value or a value that is assessed at the time of the illness/injury. Premiums for income protection may also be tax deductible.
Potential financial benefits:
• provides ongoing income to cover living expenses
• helps to cover medical costs
• investment strategy can potentially continue uninterrupted throughout recovery period.
Putting aside the obvious emotional consequences for your family, if you died tomorrow then who would be affected financially, and how? Could the mortgage be paid? How might future school fees be financed? What would happen to the lifestyle of those closest to you?
In the event of the death (and sometimes the diagnosis of a terminal illness) of the insured, a life insurance policy pays a lump sum. The s
ize of this lump sum will depend on the amount agreed with your insurance company.
Such insurance is not necessarily only for the main breadwinner, but for
anybody whose death may affect the family’s ability to earn an income. The payment of the lump sum helps to soften the blow of the loss of income, meaning survivors have a better chance of continuing in the lifestyle to which they have been accustomed, and of protecting their financial future.
Potential financial benefits:
• pays debts
• lump sum can be invested for future
• pays funeral costs
• covers living expenses for family.
Total & Permanent Disability (TPD)
An injury or illness that results in your being permanently disabled is also very likely to damage your income earning capabilities. But debts and medical bills must still be paid and the future financial health of your loved ones must be managed.
TPD pays a lump sum if you are ‘totally and permanently disabled’ and unable to work. Various TPD products carry differing definitions of ‘totally and permanently disabled’, so ensure this is clarified by your financial planner.
As with life insurance, the TPD payout amount is agreed before the policy is put in place, to ensure it will do the job of helping to pay medical bills and protect your loved ones financially.
Potential financial benefits:
• pays debts
• helps to cover medical costs
• covers living expenses for family
• funds lifestyle and property changes resulting from disability.
It’s widely accepted that good financial advice offers clients a greater retirement lifestyle, improved personal security through effective insurance, better cash flow, the peace of mind of avoiding bad investments and greater discipline in sticking with good investments and budgets. Successful financial advice doesn’t just influence financial decisions though, it also influences client happiness, and it’s this underlying benefit which presents the true value of financial advice.
IOOF, in partnership with ‘effortless engagement’, took a closer look at these subtler benefits of financial advice in their white paper “The True Value Of Financial Advice” and uncovered….
Happier at home!
Respondents suggested that with ongoing financial advice there was greater harmony at home (one 2012 study found arguments about money were the strongest pointer to divorce of all disagreement types1) and lower levels of stress associated with purchasing decisions.
A perfect life?
One of the most compelling findings was that 22 per cent of people are more likely to feel they are living their ‘ideal life’ when they are backed by a successful financial plan and without the pressure or concerns surrounding money.
Get fit with financial advice!
The study also found that financial advice benefits extended beyond emotional happiness to clients’ physical health. The results were telling, with around 1 in 5 people who don’t receive financial advice reporting anxiety or disrupted sleep due to money concerns.
What else did the research show?
“The true value of Advice” paper showed that clients who receive ongoing financial planning advice experience:
• 13% greater levels of overall personal happiness.
• 21% overall increase in peace of mind.
• 17% increased level in confidence that their core goals will be achieved.
• 20% increased feeling of financial security.
One last point, Families come first
The research also found that family wellbeing was the top ranked priority, ahead of career, wealth and even personal health. In fact an overwhelming 83 per cent of clients consider it important for family members and close personal relationships to receive professional, ongoing advice.
If you would like a copy of IOOF White Paper ‘The true value of advice’ with the full results of their financial planning survey please contact our office.
1 Dew, J., Britt, S. and Huston, S. (2012), Examining the Relationship between Financial Issues and Divorce.