25 January 2023

Whether you’re living paycheck to paycheck or looking to invest your disposable income, having a financial plan for your future is always a good idea. But what goes into a financial plan? And when do you need help?

Let’s talk about what goes into financial planning and how professional advice and portfolio management should become a part of your overall strategy. As they say: if you’re failing to plan, you’re planning to fail.

What is financial planning?

In a general sense, financial planning is exactly what it sounds like. You’re making a plan for your financial future. This includes both short and long-term goals, dealing with debt, and monitoring your investments.

More specifically, a financial plan is a document or group of documents that identifies your goals and objectives and offers tailored wealth creation strategies to help you achieve these milestones.

The advice provided in your financial plan may include anything from cash flow and savings advice, to advice on debt management and insurances as well as superannuation and retirement planning. The more specific the picture of your financial affairs, the better you can plan for your financial future.

When should I begin thinking about working with a financial planner?

It’s never too soon to work with a financial planner. Even if you’re just starting to save, an expert can explain your options and steer you in the right direction based on your specific needs and goals. Your financial planner will offer advice based on current regulations and market conditions.

If you approach these milestones and are not currently working with a financial planner, now might be a good time to engage one:

• Purchasing your first home. Your financial planner can work with you to determine what you can afford and help you to make rational decisions so that you don't overburden yourself with debt.

• Marriage. If you are getting married or combining finances with a partner, your financial planner can help you to understand and take advantage of the financial benefits that may be available to you as a married couple.

• Starting a family. Your financial planner can offer you advice around protecting your family with appropriate insurances, as well as providing advice on long-term education investments for your children.

• Retirement. As you approach retirement, an adviser can offer enormous value. Not only can a financial planner help you to build your retirement assets and structure your income streams tax-effectively, they can also assess your current investment strategies to make sure that they remain appropriate for your circumstances.

What are the stages of financial planning?

Your financial planner may have their own process for creating a blueprint for your investments and goals. However, there are some common steps you will progress through when working with a financial planner to create a comprehensive financial plan.

1. Assess your current financial position. Before you can make any financial goals, you need to undertake a realistic assessment of your current situation. This includes your savings accounts, monthly income, loan balances, home equity, current investments, insurance plans, super contributions, and any other assets or money coming in and out of your household. The more informed your financial planner is, the better they can serve you.

2. Talk about financial goals. Having analysed your financial situation, your financial planner will work with you to identify your financial and lifestyle goals and objectives, which could include the purchase of a property, paying university tuition for your kids, a vacation budget, retirement spending, and more. Your goals will inform the strategy for your plan forward.

3. Develop a strategic plan. Next, your financial planner will begin drafting your financial plan and documenting this in a Statement of Advice (SoA). The SoA will spell out strategic recommendations that are designed to help you achieve your goals and objectives, along with a recommended investment strategy that aligns with your level of comfort and understanding.

4. Implement your financial plan. Once you agree to proceed with the advice provided in your SoA, the next step is to work with your financial planner to implement the recommended strategies and investments. This may involve transferring funds between accounts, instigating a change to your spending habits, or working with third party professionals such as estate planning lawyers.

5. Continue to review your progress against objectives. No financial plan is set-and-forget. You should have periodic meetings with your financial planner and expect them to deliver analysis about what is working and what isn’t working. Review your reports and make necessary changes to ensure you are maximising your financial returns and responding to market changes.

What should I look out for when starting to look for a financial planner?

Before you engage a financial planner, you should consider the following:

• Match your needs to their expertise. Not all financial planners specialise in every area. For instance, if you need Centrelink advice, make sure they have a strong capability in this area before you proceed.

• Make sure they are transparent. You should never be in the dark about the state of your investments or the fees that you are paying. Ask about how they will keep in contact with you and provide updates about the state of your finances at your first meeting.

• Consider your budget. Consider your preferred fee arrangement. Would you prefer to pay a flat dollar fee for service, or are you comfortable with a percentage fee based on the value of your investments? Ask your potential financial planner about their methodology when charging fees.

• Understand their investment approach. Steer clear of aggressive investment strategies and businesses promising high investment returns. Younger investors in particular may be encouraged to take more risks with their portfolio and should be wary of speculative investments.

• Ask lots of questions. You can never ask too many questions. What types of services does the financial planner offer and how do they charge for these? Are they aligned with any Fund Managers or other financial institutions? Can they provide references?

How to get started

It’s never too soon to start working with a financial planner. You don’t need to be wealthy to benefit from wealth management services, you can begin this journey at any stage in life.

Many people find their financial planner via referral. Ask friends and family if they know someone trustworthy. You can also use a website like Adviser Ratings to see what other people have to say about your potential planner.

If you have financial planning needs, Findex may be able to help. We offer a suite of services that include wealth management, tax planning, and more. Please contact us today to speak with a financial planner.