The financial advice industry is one that has lost some respect over the years. For so long it has been too easy for anyone off the street to do an online course and set up shop. It has also been too easy for adviser self-interest to interfere with client best interest. The rogues and the inexperienced have tended to trample the reputation of an entire industry.
Tertiary qualifications, years of experience and good reputation are what you should look for. Newcomers are green and their knowledge levels are very low, so they tend to focus on financial products.
However, there is a huge difference between product-selling and providing advice that is not product-based. Genuine financial advisers are generally not sales people. They focus on personalised strategy and only concern themselves with product when the need appears. They have an honest interest in guiding people around life’s financial pitfalls, into good financial habits and ultimately towards a better position.
To do this well requires serious tertiary study and years of experience.
Putting you in a better position is not about making you rich. For most people, that is a dream. I prefer to work with reality. Your income and earning potential is largely the result of your own ambition and career choices. I will show you how to protect your income and how to use it as a base for investment, but I can’t create base income where no means and no will exist.
A case in point – a few years ago, I visited a couple with no children whose combined income was in excess of $300,000 a year. They lived a high lifestyle and had a substantial amount of personal debt because they spent more than they earned. They asked me to fix it. I asked if they had considered spending less, paying off their debt and saving more. They were horrified. They told me that my job was to fix it but were adamant that would not involve any change to their lifestyle or spending habits. I wished them luck and left!
A better position is not only about better investment returns either. Although I can teach you the fundamental principles underlying prudent investing, all investment is subject to risk, and there is no such thing as a risk-free investment unless you are in cash; and that also loses real value while ever the interest rate is below CPI.
So how else can financial advice help?
My brand of financial advice is about helping you do what you can to improve, given the position you are in. It may require solving financial problems, managing risk, and making you aware of possibilities you weren’t aware of. Ultimately, it is to guide you onto a comfortable path towards your own goals.
To me, part of putting you in a better position is imparting knowledge to you. So my role is also educational; teaching you what you don’t know and arming you with the skills to improve your financial wellbeing.
So let me give you just three (3) examples of where I fit in (there are many more):
- How much do you know about superannuation? Probably not a lot and because it’s a difficult area you largely ignore it. What you don’t realise is that attention to your super can reduce your income tax now and set you up for a tax-free retirement later. It can also host insurance benefits that you can’t otherwise afford.
- Do you know how to use Transition to Retirement to your advantage? Some people research it but most middle-age people I meet don’t understand it. What you don’t realise is that government has provided us all with a seriously good opportunity to save more money for retirement, lower personal income tax, and / or reduce working hours leading into retirement. Why wouldn’t you consider it?
- How much do you know about Self-Managed Superannuation Funds (SMSF)? I know from experience that the answer is next to nothing, but that hasn’t stopped over a million people starting up over half a million SMSFs in this country. What you don’t realise is that by using an accountant to set up a fund for you and by handing off the administration to an external service, all you have done is acquired the vehicle and a service contract, but there’s no one in the driver’s seat. What you are missing is the knowledge and experience to be the effective CEO of your new retirement investment business who is capable of breathing life into the real opportunities offered by the SMSF concept.
My point is that you don’t know what you don’t know. Financial advice is about showing you what is possible and what you can do in your situation. It is about guiding you through the maze of rules and demonstrating to you how to use Australia’s financial system legally to your advantage. In the end, my job is to allow you to make informed decisions for yourself.
The rest is really up to you. Remember the old saying, “you can lead a horse to water but you can’t make him drink”? You as the person receiving advice must play your part also if you are serious about change and improvement.