RETIREMENT & LIFESTYLE PLANNING      Baby boomers need to plan their transition into retirement for  Financial Security     Active Health Management  Emotional Wellbeing  Maximum Self Esteem ISSUE - 17 - APRIL 2003

At the moment it seems that not a week goes by without major headlines about the massive redundancy payments that are directors and CEOs of Australian companies. Whether they deserved them or not is up to the shareholders of those companies and share markets to decide, but it does raise a important question – were the shareholders and market fully and clearly informed of the terms and conditions of these people’s employment contracts? Over the last few years considerable pressure has been brought upon Australian companies by investor groups, markets and industry regulators to improve the transparency of their accounting and reporting processes. These efforts have been designed to ensure that all relevant financial information is disclosed in advance of an event, to enable potential and existing investors with the opportunity to accurately assess whether to buy, sell or hold their stocks.

This concept of ‘transparency’ also applies to the financial planning industry and the process of obtaining of financial advice. When seeking advice from any financial planner, you should always be given all of the information that you need to know to make an informed decision as to whether or not to accept that advice.

For any one seeking financial advice, there are a number of key areas that you should receive information on, even before you start discussing your financial needs, goals and plans:

• Who stands behind or takes responsibility for the advice that you are going to receive?

The financial planner will be an authorised representative of a Licensed Securities Dealer. Who is that?

• What type of advice is the financial planner authorised to give?

Are there some areas that the financial planner is not knowledgable enough to give advice in, such as direct shares, salary packaging and tax effective agricultural investments? If this is the case with a financial planner with whom you meet, will they be able to make recommendations or offer advice that comprehensively address all of your needs?

• What fees will you be charged for the advice you receive and what form will these fees take eg. Commission or fee for service?

Who does your financial planner receive remuneration from? This information is extremely important because you need to know if the advice you are being given is influenced by who is paying the planner.

Is there any relationship between the financial planner and the issuer of the product they may recommend?

This may take the form of higher commission payments or ‘soft’ extras such as additional payments for ‘loyalty’ or overseas conferences. If so, is this relationship infl uencing the type of advice you receive? The answers to these key questions should be both freely offered and clearly explained by the financial planner.

After choosing the financial planner you are going to work with, the first thing they must do, by law, is provide you with a copy of their Financial Services Guide (FSG).

This guide is a written statement of advice and should contain all the information you need to know about any factors that may influence the advice they give you, for example: commissions, additional payments received from product issuers and so on.

However, it is important for you to enter the advice-seeking process clearly aware that ‘transparency’ is a two-way street. One of the most critical factors potentially influencing the type of advice that you receive is the information you provide to the financial planner.

It is important for the planner to fully understand your present circumstances and future objectives before they begin working with you to tailor a plan to fit your needs.

Therefore, their focus during your first meeting should be on getting to know you. This ‘fact finding’ process is to help them (and you) to define your financial goals, your tolerance to risk in relation to returns and so on. If you hide or don’t disclose all relevant financial details to them than the advice you receive may not help you to achieve your goals. The person most affected by this will ultimately be you.

It is only after you are happy that your goals have been clearly identified, that your financial planner should begin to discuss the various methods you could choose to achieve these, and guide you towards the ones that best suit your needs. In its simplest form, this is what financial pIanning is all about – clarifying financial goals and personalising the best strategy to help you achieve them.

Simon Wallace National
Compliance and Advisory Services Manager,
AXA Ph 13 29 87
Web www.axa.com.au

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