A friend says my wife and I should see a financial adviser but I don’t think we earn enough for it to be worth it. Our combined income is between $130-$140,000pa. We have two children in primary school and are paying off a $300,000 mortgage. We don’t have much money left over to invest in shares. Is paying for advice really worthwhile for someone like us?
Top answer provided by:
Phil Thompson
This is a question that captures the essence of the new age financial adviser, better called a Financial Planner, which is helping people make sense of what is going on financially, and providing ideas for strategies which can improve a client’s financial situation. Providing investment solutions is just one part of what a financial planner can do.
Your situation is one that would be common to many, that is working, raising kids with all the costs that come with that, paying a mortgage and then feeling as though there is nothing left over to save. This is exactly where a financial planner can help you better understand what is going on, understand things you could do now to not waste these working years, and also to provide a reassuring vision that all will be OK.
For example, a financial planner may help you understand that when sticking to a realistic regular spending budget and after paying interest on your mortgage that you could have some funds left over. This would be called your cashflow surplus. You could then discuss what you could do with that surplus. Do you direct it to paying down your mortgage quicker? Do you contribute some to super using salary sacrifice? Do you spend it paying interest on an investment loan for a property, shares or managed funds? Or do you spend it on holidays or increase your regular spending? Or can you do all of these things? There will be many options available and a financial planner can help you understand the pros and cons of these various strategies.
Further, a financial planner can help you understand how your superannuation is invested. Many people do not really understand the make-up of their superannuation investments with respect to the risk taken on board, and the expected outcome in returns. There may be a more suitable investment option to consider within your existing superannuation plans, based on your lifestyle objectives, expected investment timeframe and tolerance for volatility.
This kind of conversation can be extremely useful to have a better understanding of what you have and what you are doing, and may be all the reassurance you need to feel more confident with your financial situation.
Where it is useful, a financial planner can do a financial projection for you to help you understand what your current expected financial destination is. Will you have your mortgage paid off by retirement? How much will you be able to spend in retirement? Can you afford to have regular holidays and car upgrades during retirement? Understanding this picture can be an extremely satisfying and liberating experience, as often people are in a better financial situation than then realise when you look at the bigger picture. A financial plan would then be able to show you the expected outcome when adopting a number of financial strategies, so you can see the expected benefits available. This is pure financial planning. Investment solutions – only where and when needed - would be the next step.
The hardest time financially for most people is the period you are in now. Getting some advice now from a Financial Planner can lead to a big difference in expected outcome for you, if you know the right things to do now. Let time work for you to increase wealth. Let information reassure you that life is looking good and you are on track to achieving your financial goals.
Expect to pay a fee for these services as needed, with a good independent Financial Planner charging a few hundred dollars to start you on a path for better financial understanding and control.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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Comments20
"I think Phil's situation is all too common - thinking that I don't have money to invest, or am hamstrung with bills means that they feel as though they are not worthy of advice (or wanted). But sometimes just the basics can make a difference. I sorted my friends Super out, 5 accounts with fees all totalling around $2500pa. I helped her move to a single product and now she has just $650 pa of fees. So not only does this mean that by age 65 she has now saved an additional $41K in fees - but importantly she is now "engaged" with her Super. She can tell me her returns and takes a greater interest in this overall, she finally is into salary sacrificing. And this is someone who would have never ever ever paid for Advice, only that we are mates did we address this and now she realises the VALUE in planning. Probably my best advertiser now for something so simple."
Nicole 16:36 on 01 Jun 18
"Phil your answer is correct and broadly ok but I think the answer misses the point of his question to an extent. You have framed your answer in strategy and technical language about what advisers can do not what they achieve for their clients. The best advisers do three things: 1. Identify what a client wants to achieve in life; 2. Builds a financial strategy to help them get there; 3. Implement the necessary financial products (debts, investments, properties, super, ttrs etc) 4. Provide a safety net (risk insurance) until the wealth has been built. Direct promotors and industry funds have already demolished the value proposition of product based advisers. I am watching the pure risky’s go kicking and screaming the way the pure commission driven super advisers went a few year ago. Good advisers are delivering good strategy and demonstrating their value by creating strategies that save the client more than their fees. Robo advice and industry funds are coming for that value proposition now. The next generation of advice is coming from advisers who focus on client outcomes, client behaviours and removing problems. Cashflow management and reporting (www.moneysoft.com.au) , estate planning (www.estateplanningforlife.com.au) , aged care (agedcaresteps.com.au) , Centrelink support etc. Good cashflow coaching can save the sample client that started this thread $10-$20-$30k pa. Intelligent gearing can generate positive cashflow to accelerate repayment of the $350k debt and then build an education fund for their children. The best planners will use Xtools+ models to benchmark data derived from tools like Moneysoft so that the clients can get a quarterly progress report of their success against the plan effectively creating a P&L and Balance sheet not just the asset statement that our industry has provided up to now. They don’t pay us for products, they forget our clever strategies, they don’t stay for our charming personalities or relationships, they join us for the outcomes we create and they stay because of the future outcomes we will create for them. "
Gil Gordon 17:32 on 10 Mar 16
"The overall advice is sensible and well constructed but I'm amazed no mention of risk insurance ! All the best wealth advice in the world is absolutely useless if the income stops or an unseen early death takes place."
Rick 13:54 on 10 Mar 16
"I charge $110 for a first meeting. if they don't get anything out of it, in knowledge, clarity, peace of mind. I don't charge them as per there answer. they always come back."
Ian Hamilton 12:54 on 10 Mar 16
"Yes George, what you describe sounds similar to this adviser ratings site, BT is handy if you want a Westpac adviser - what about the other 95% of advisers in Australia? Maybe compare what BT says with Adviser Ratings?"
What about AMP? 09:40 on 10 Mar 16
"If you are looking for a reputable adviser BT Adviser view is the best place to start. You can go online, enter your postcode and a series of Adviser names will show in the search. From there you can select which adviser suits you best based on experience, qualifications and live customer feedback. Awesome and transparent way to choose the person you wish to provide you with advice that will help you prepare for you best financial future."
George 06:59 on 10 Mar 16
"People will spend HUNDREDS on their accountant to do their tax return without questioning it. People will spend THOUSANDS on stuff they don't need and say they can't afford financial advice. People will spend TENS OF THOUSANDS on income tax every year without finding ways to reduce it. People will spend HUNDREDS OF THOUSANDS on mortgage interest thinking they have no choice in the matter. By the time people reach retirement they've wasted MILLIONS by avoiding financial advice and then complain that 'the system' has deliberately destroyed them. Good financial planning is worth MILLIONS to a working family and good financial planners need to value themselves accordingly. "
Bryce Jenkins 15:32 on 09 Mar 16
"Phil's comments are spot on, but that level of holistic advice comes at a chunky price and not "few hundred dollars". A lot goes into preparing a sound financial plan so expect something north of $1,500. And if you are not prepared to fork out that kind of money now, you should at least attempt to get the financial planning fundamentals completed on your own using Google. These are save for a rainy day; spend less than you make, pay off personal debts; consolidate super, get some personal insurance. "
Garry 15:03 on 09 Mar 16
"It's interesting that some advisers will undervalue their advice and knowledge so much. A few hundred dollars is ridiculously undervaluing what we do. Having a conversation and helping people understand what is truly important to them is invaluable and is often part of the discovery process, not the provision of advice. In terms of the advice provided on how to get there, well, try and put a price on financial security. In my experience, value, which can be monetary, and most times is non-monetary is the misunderstood relationship with financial planning from the perspective of most demographics, especially this one."
Damien 15:02 on 09 Mar 16
"Great response Phil, I wholeheartedly agree and I agree with some of the comments about insurance being a vital part of the planning process - clients then have the ability to make informed decisions. Im not sure about you, but having a general conversation and a brainstorming session on options available without automatically having a tailored financial plan created does not need to cost a client a lot of money (definitely not $1,500 as Catherine mentioned)"
Maciej Stanek - Freedom Finance 14:44 on 09 Mar 16
"Agree with the advisers statements but in my experience a few hundred dollars is spectacularly on the low side of the price range for financial advice. More like $1500 for a basic start plus ongoings..."
Catherine 14:22 on 09 Mar 16
"Sure Ben, the bank advisers are fine - it's just that when they sign you up the policies from the likes of comminsure which is owned by a bank you have to worry! No offense David Robson - but are you a bank bot?? ;-)"
watch 4 corners! 14:21 on 09 Mar 16
"Definitely worth seeking the services of an adviser. Don't believe all the hype that it has to be an 'independent' adviser, as these are as rare as hens teeth and on top of that there are plenty of reputable advisers out there that come from all sorts of practices and yes this includes the banks."
Ben 14:16 on 09 Mar 16
"Excellent response/article. One of the biggest challenges in my opinion is getting people to understand the range of benefits from having a financial advisor. It's not just about buying some shares if you have some spare cash. Projecting, tracking, coaching, education, improving efficiencies etc. All sorts of areas can be helped, along with less tangible things like not being so stressed out about your finances, as you have an advisor to keep you on the right track."
David 14:16 on 09 Mar 16
"Actually I was referring to Gavin's comment the arrow should be the other way!"
Patricia 14:11 on 09 Mar 16
"Definitely worth seeking the services of an adviser. Don't believe all the hype that it has to be an 'independent' adviser, as these are as rare as hens teeth and on top of that there are plenty of reputable advisers out there that come from all sorts of practices and yes this includes the banks."
Ben 14:01 on 09 Mar 16
"In addition to Phil's comments, a good financial plan should include a review and assessment of your personal risk insurance needs. Insurance is like the foundations under your house. It's a vital component of a good financial plan and will provide cash when you need it most, such as on death, total and permanent disablement or when you suffer a major listed illness. Income Protection insurance will provide you an ongoing income if you're off work for a long period of time. Insuring against these events will ensure you continue to meet your financial goals and objectives. "
David Robson, Commonwealth Financial Planning 13:58 on 09 Mar 16
"In addition to Phil's comments a financial planner can review your insurance needs, to ensure that your plans don't run off the rails if either of you suffer a health event such as a major illness, a long period off work or even death of a partner. Think of insurance as the foundations under your house. Insurance is a vital component of a good financial plan. We can assess your needs and work with you to provide the right type and amount of cover within your budget. "
David Robson 13:50 on 09 Mar 16
"This ^"
Patricia 13:49 on 09 Mar 16
"The best advice I would give is to see a professional, reputable adviser sooner rather than later. This adviser is right when he says let time work for you to increase wealth. I wish I had got around to see my adviser a lot sooner than I did. What he's done for me so far is excellent, if I'd done it 10 years before I'd be retired already!"
Gavin 13:47 on 09 Mar 16