Financial Planners....confusion

Smashed avo aint cheap ya know. Someones gotta fund it somehow.

 

I may not be the happiest larriken on earth, but maybe thats how I deal with the situation and feel its the best for me

 

My regular bank (Big 4) offers so-called premium financial advice and charges 1% commission. So, you invest $500k, they whack you with a $5,000 charge. And the people giving advice never stike you as heavy hitters or people at the cutting edge of the industry, but rather pedestrian corporate types. Always struck me as a rip off. I use a broker for purchases who charges 0.12%.

 

Come in spinner

 

The problem is they didn't have degrees. Just basic certificates which is far riskier.

This has changed recently though and there is now a requirement for a degree.

And not to say experience isn't hugely valuable

 

Whether they have a certificate or a degree, it doesn't make any difference.
If you're crap, you're crap.

If you want to know if the FP is any good, ask them about their own FP - and see how much they are prepared to share. They want to knows yours, so you should be able to know theirs.

 

Thats like asking a surgeon if she operates on herself. Or assuming that just because I own IPs and do tax I'm better at tax advice concerning property than a tax adviser who doesnt own any except their own home (which is on Sydney Habour and debt free).

Terry is good a wills and deceased estate planning but hasnt had to die to learn that.

 

Your broker will know jack about strategy, planning, tax, estate arrangements, death nominations, insurance matters and the like. And the 0.12% is per trade. In and out. You are confusing a cost to place a buy sell order and advice and services.

 

In my example, it all depends on whether you see the $5,000 for advice from the major banks as value for money. I don’t I’m afraid.

 

I happen to consult a financial planner when necessary but on a fee-for-service basis. I have found the service especially good when I engaged a solicitor in respect of my late wife's Will (Discretionary Testamentary Trust) as the planner also sat in during my session with the solicitor and provided input on financial implications associated with the Trust and her superannuation in respect of her beneficiaries. Many variables involved.

That particular exercise cost way, way less than than $5k and the occasional advice costs nothing near that.

To tar all planners as being mere money grabbers isn't entirely fair. Probably the difficulty is finding one with appropriate rapport.

 

I think most people mistake financial planners as expert investment advisors.

They are far from it, they are not about out performance and creating above average wealth.

 

Majority of Financial Advisers i know and have dealt with (I am in the industry - technical services) know how to flog products and barely know a strategy if it smacked them in the face. Out of all the Advisers i have dealt with, I have 3 that I would recommend.

Most have quite poor money management themselves - hence why i believe an adviser should be able to show you how they have done it for themselves especially if they are advising you on financial matters - for most advisers i find it to be a case of "do as i say, not as i do".

Surgeons... well its a bit hard to do surgery on yourself if your under aesthetic, unless you're one of those crazy assassins in movies that perform surgery while still awake.

A better comparison would be an accountant - if an accountant can't manage their own tax affairs, what chance do they have in managing mine.

Being able to demonstrate what you have says alot - its a the difference between a text book adviser who has rote learn the syllabus vs one who actually understands what is going on and can see the right patterns and vary the strategy when required.

I own IP's and i do my own tax. Am a better than a most tax advisers - probably, but then again I did take the time to read up on tax as opposed to rote learning from a text book. Would i say I am better than you, not a chance in hell. I've see your posts, there is a very detailed level of understanding and you would know how to apply different strategies. Now compare that to your shopping centre accountants, those guys generally don't know squat.

 

Good and bad in every industry.

There are several bad industries as a whole. Anyone who can clip the ticket generally needs prudential supervision and monitoring or rules to ensure the clients interest are placed well above profit.

This includes mortgage brokers, planners, insurance sales, real estate, even some lawyers who feed off vulnerable people with no-win deals etc. Imagine if I set fees based on the refund I can assist obtain ??

 

What about managing risk ? We place that above performance. If a market crashes 20% you lose 20%. To make it back needs a performance of 25% that follows. If nobody picked the 20% fall they wont pick a 25% rise.

What about managing structure and outcomes not related to performance ? eg avoiding beneficiaries being taxed. Tax free income or part pensions etc.
What about aged care financial advice ?
What about pre-death financial advice ?
Financial estate planning ?

I think comparing cost v out-performance alone is a way to encourage high risk and poor longer term returns. We are seeing a LOT of this now with record low aweful cash rates. Retirees etc are taking on other market based investments prone to high risks where they once held capital stability for retirement security of their base capital.

 

Spot on @Paul@PFI, managing risk is hugely important and widely underestimated.

I also think a lot of people confuse the role of financial planners with straight out stock broking. That's why there are so many comments about how to measure the value of a financial planner based on a percentage return on investment, as if they are a product or asset class.

Financial planning should be seen as a process, not a product.

 

Yes that was my point Paul...they are generally just about getting market average returns but have a whole depth of Strategic knowledge when it comes to a wholistic standpoint.

Most have indepth knowledge with the in/outs of Superannuation strategies, risk in terms of insurances, estate planning, centrelink benefits and how to maximise, etc.

They are not investment experts as most mistakenly believe.

 

Most people who go to financial planners end up with a plan to make them poor. Most financial planners suggest you put money aside regularly, invest in managed funds and over time build a nest egg and then retire at the age of 65 on less than your pre-retirement income. Most financial planners are biased towards selling managed funds because most financial planning companies in Australia are owned or controlled by banks or insurance companies. Most financial planners are well-intended and point their clients to conventional savings and investment strategies that are good if you want to be average but don't set you up for financial success.

 

as a former financial planner I must say that I never once recommended a managed fund investment and my company and dealer group was not owned or controlled by a bank at all. And what is wrong with putting money aside regularly?

 

The basic premise that a financial planner can make you wealthy through investment choice can be largely incorrect. But FPs have a higher than average experience with diverse product options rather than a myopic tunnel vision or ignoring other products.

Avoiding loss, managing risk + poor returns are the three best ways. Then add - Growth, income and reduced fees. Adding to the capital progressively is a further strategy that Terry wisely points out. (And eliminating debt) Avoiding paying someone a fee is one part of the formula but needs to be balanced v's the benefits

Some are just product peddlers. ie as Jane above points out they sell product and not the process.

Some clients expect that if you charge them 1% you will make them an extra 3%. Thats a really poor view. Its like thinking if you pay more for an IP you will get a higher yield. Whats more important is what they do for the 1%

 

The greatest strength in having a good Financial Planner more so than selecting product / planning for many investors is in helping to prevent them from doing stupid things especially when market calamity dominates the news.

I’ve read of world renowned investing experts / authors who use a FP as they don’t trust themselves to “stick with the plan”. I’ve given my wife final decision over any portfolio actions nowadays to stop me from doing stupid things.