Mark Bouris is well-known as the founder of Wizard Home Loans and host of Nine Network’s The Celebrity Apprentice. As chairman of financial services advisory network Yellow Brick Road, he also knows a thing or two about wealth creation. Here he helps demystify the challenges of finding independent retirement income advice.
The role of a financial planner or wealth advisor is to understand the client’s needs first. It can’t be about earning commission - it has to be about the client’s needs and precisely nothing else.
A majority of adult Australians don’t seek financial advice. Most Australians with money in investable assets believe that advice belongs only to the rich and powerful, which isn’t the case. At a minimum, financial advice needs to offer education. And it’s important financial advisors don’t present something too scary in terms of fees. Many Australians think ‘what I get will be too expensive and I won’t understand it. It’s outside the reach of my experience’. The Australian Government endorses advice for all Australians, so it should not be so complicated.
The most common questions I get asked are: “What is the amount that I will need to receive to live comfortably?” “Is it possible to live on the amount I have or not?”
Most financial planners work in their own space, pay rent and administration costs etc., so they need to receive a certain level of fees, which means that only clients with an investment of about $1 million or higher will comfortably fit their business plan. By establishing Yellow Brick Road, I have attempted to break down this structure. If someone is living out at Lakemba, for instance, it is important to first of all establish a relationship. So if we don’t have high fixed costs, we can offer quality advice at an affordable price.
Self Managed Superannuation Funds (SMSFs) may not suit everyone. But if you have super of $250,000 or more, a SMSF may be worth considering.
So how do you go about selecting a planner? The first step is to look in your local area for someone who is qualified and ASIC certified, as well as local and accessible. Having access to your financial planner is very important, particularly with the volatility of the market. You might like to look for a smaller business which has access to head office support, in other words a direct conduit to a bigger organisation.
I really would prefer to say what not to look for. Avoid ‘unbelievable’ returns, as these are probably unrealistic. If it sounds too good to be true, it usually is. It is hard to beat the market. Don’t get involved in anything risky, as at retirement age you need to play defensively. Make sure the individual you are talking to has head office backup, so they can give broad advice based on research. Your financial planner should be looking at your whole situation, including insurance and estate planning. Finance isn’t just about buying shares.
There are four major questions you should ask your financial advisor:
• How do I retire comfortably?
• What if I get sick?
• How will my family and I manage this situation?
• How can we ensure everyone is aware of this advice?
A good tip for seeking financial advice is that you pay a fee for a service. Getting started with a plan is only the first step, maintaining it is crucial.
My preferred term for what my business provides is as a wealth manager. Wealth managers are deliberately trying to differentiate themselves from financial planners, as wealth managers assist with wealth advice, as well as helping you to create an ongoing plan.
Other key points clients should address with a planner before committing are:
Is there complete honesty and transparency in the transaction?
Are they an independent operator or part of a larger organisation?
In other words, are they controlled by a larger institution (often a bank) that may have a bias in the advice they give you?
Do they have an interest in the asset class they are advising you to buy?
Importantly, read the written disclosures that planners have to provide. They tell you how he/she gets paid, who ultimately controls the advice you receive and if anyone involved benefits elsewhere from you following the advice given.
Don’t be afraid to ask questions and don’t follow the advice if you don’t understand it fully.
Your retirement income Q&A with Mark Bouris
Q. Are planners useful for those who think they will end upon an Age Pension anyway?
Yes, planners can help such people restructure their assets and/or their income to obtain the maximum possible pension entitlement. There are several strategies available that can assist, so it’s never too late to seek professional guidance.
Q. Is there anything at all those entering retirement with insufficient funds can do to improve their financial outlook?
Yes, there are a few things that can be done to free up or re-arrange capital. These include downsizing of the principal residence (to release cash for investments or super to assist funding living expenses) or utilising superannuation wisely (to provide for tax effective income streams).
Q. What type of strategies can wealth advisers use to assist those already in retirement?
Ensuring that retirees are invested appropriately (not exposed to unnecessary risks) whilst utilising some of the many available solutions (e.g. Account Based Pensions, Annuities etc.) to produce a steady retirement income stream. If they are receiving an Age Pension, as stated above in the first question, there are still potential strategies including rearranging assets or income to optimise their situation.
Q. Do you have some simple rules for those planning a Transition To Retirement (TTR)?
Seek professional advice prior to making this decision, as there are many considerations. Tax benefits begin from age 55, but really kick in for most people from age 60, when superannuation income streams are paid to you tax-free. The TTR strategy allows people to wind back their work commitments if desired, as well as providing these ‘preretirees’ a smart way of building their super balance in the years prior to retirement, using salary sacrificing. Confirm that your employer allows salary sacrificing and seek advice to ensure that you don’t breach the superannuation contribution caps.
Q. What is the one thing anyone on a limited retirement income can do today to improve his or her position?
Here are several ideas:
• Review your budget and spending habits
• Speak to Centrelink about entitlements
• Seek higher interest rates on cash investments (e.g. online savings accounts)
• Seek professional financial advice, as it may not be too late to contribute to super and generate tax-free income, or to utilise a younger partner’s superannuation to increase social security entitlements. The superannuation assets of a partner who is under the Pension Age are actually exempt from the Age Pension Assets Test.
Yellow Brick Road offers financial advice and services, throughout more than 100 branches nationally.
Ph 1800 927 927
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