Here are some answers to questions we often get asked by prospective clients seeking our assistance and our financial planning services.
What is “financial planning” – is it the same as “financial advice”?

Although you receive “financial advice” from your financial planner, financial advice refers to the actual recommendations or advice given. For example, a planner could recommend you buy BHP shares, salary sacrifice to super or recommend that you increase your exposure to international shares.

This contrasts with “financial planning”, which is the process of meeting your life goals and objectives through proper management of your finances. Your goals and objectives can include buying a home, savings for your children’s education or planning for retirement. It is a process that consists of specific steps that help you take a big picture look at where you are financially. Using these steps you can work out where you are now, what you may need in the future and what you must do to reach your goals. It involves more than just your investments, as a comprehensive financial plan will provide advice on estate planning (Wills), risk management (insurances) and what structure to use for your investments (family trust).

What past experience should a financial planner have?
When it comes to investing, the markets can move through cycles that can last 5-7 years. So it is possible to meet a financial planner with five long years of experience that has never worked through a downturn in the markets. Many planners were unprepared in 2008 when the Global Financial Crisis struck. More importantly, they didn’t have the required skill set to handle their clients’ emotions when confronted with falling investment balances.

Past employment can also guide you in the right direction. Did your planner come from another related or technical field such as stock broking, merchant banking or accountancy? Hard salesmen sometimes lack the empathy or ethics to become great financial planners.

Finally, how old is your financial planner? Life’s lessons are acquired over many years and wisdom can’t be obtained through a university degree. Marriage and children, alongside educational qualifications, can sometimes help to equip your planner with the rounded skills required to be a successful planner and to deal with the emotional side of investing. Investment psychology is now a huge field of study on its own.

What qualifications should a financial planner have?
It is vitally important that any financial planner you engage has the relevant tertiary qualifications and be a Certified Financial Planner (CFP). It would also be an advantage if the planner had degree qualifications in associated fields, such as accountancy or finance, to complement their planning qualifications.

Examine the prospective financial planner’s “curriculum vitae” to get a sense of their tertiary studies and work experiences, but pay particular attention to financial planning qualifications.

What professional association should your Financial Planner belong to?
In Australia, most financial planners belong to either the Financial Planning Association of Australia (FPA) or the Association of Financial Advisers (AFA). By being a member of one of these associations you have demonstrated a commitment to the highest standards of professional competence and you have committed to their Code of Ethics.

Superannuation specialists can also join the SMSF Professional Association of Australia (SPAA) to demonstrate their expertise in the field of superannuation.

These Associations have thousands of members, are well funded and are recognised by State and Federal government. More importantly, they require members to participate in strict ongoing education programmes.

How much will it cost?
We believe that a professional financial planner must have a sound basis and be able to demonstrate that they can add value to a client’s circumstance, before accepting anyone into their business. Furthermore, a prospective client will want to meet a financial planner to examine their qualifications and experience and learn about any areas of specialisation, before committing to any relationship.

Therefore, it is in the best interests of both sides if they can meet free of charge in the planner’s office, to see if they can determine whether there are common grounds to move forward. Hence the first meeting should be without obligation.

If the planner believes that they can add value to the client circumstances, then they should articulate where the value can be added and provide a Plan Writing quote for the perspective client to consider.

In the process of providing a financial plan to a new client, there should also be a written Terms of Engagement, outlining exactly the services that will be provided yearly and the cost of such services.

Find out how Markson Financial Planning can help you build wealth and achieve your desired financial future, talk to us today – (02) 8007 6244.
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