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).
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.
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.
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.
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.