Common questions planners are asked

Visiting a financial planner can be a little daunting. To help put you at ease and better understand the financial concerns people have, we asked Kane Jiang, Director of AA Financial Planning, the most common questions planners are asked.

1. Do we have enough for retirement?
When meeting with clients I often hear them say, “I went to my super retirement seminar, and they said you’d be fine if you have a certain amount (say half a million dollars) to retire. I have that already, so I should be fine. Shouldn’t I?”

I find this question alarming, as this kind of general advice rarely considers an individual’s circumstances. These seminars don’t take into account the various potential expenses incurred during retirement, such as buying a new car, renovating your house, helping your children with a home deposit, or allowing for the type of holidays you like to go on.

These kinds of seminars rarely address risk. What if we have another global financial crisis (GFC)? What if the Age Pension no longer exists in 10 years’ time? What if you live to 98 years old?

Moreover, these seminars rarely emphasise the assumptions used in the projection examples. What earnings do they use? I’ve attended seminars where the projected return of investment was 10 per cent per annum (justified by historical returns). But can your portfolio realistically achieve that figure in the future without taking a lot of risk (especially since you will no longer be working)?

2. What can we do to maximise our financial situation?
For one, you can maximise your finances by minimising unnecessary expenses. Debt is a bigger issue when you are close to retirement than when you are young.

Another expense that you may be able to minimise is tax. Luckily there are many strategies available to minimise taxes, especially when you are closer to retirement age.

You can also improve your financial situation by maximising income. Clients probably have more control over their own exertion income, such as wage/salary or self-employment income, but financial planners should be able to help you maximise returns on your investments.

3. What sort of returns can we expect if we invest through you?
Firstly, you should be aware of anyone who has promised they can double your money in a short time. If they have such a skill, they would not be in a consulting business, as they would have been doing it for themselves!

If you want high returns you will have to deal with more uncertainty.

Rather than focusing on percentage returns, you should work closely with your financial planner to discuss your risk profile, investing horizon and investment strategies along the way. Sometimes solid advice from your financial planner could be as simple as them saying ‘put all your money in the bank’!

4. How much are your fees?
Every financial planner has a different client value proposition. Some start with charging a few hundred dollars, and some may charge in the tens of thousands. Some charge using a ‘fee-for-service’ model, while others may receive commission.

What you need to ensure is that your financial planner is someone who is licensed to provide financial advice. You can check the ASIC professional register for this. And believe me, it is not cheap to get licensed as a financial planner.

And don’t forget that financial planners also have to pay rent, invest in office systems, commit to ongoing training, subscribe to professional bodies and research companies. This is all done in the name of providing a professional service that will look after your financial interests properly.

5. Why are your fees so high?
Although our existing clients would never say this to us, I don’t doubt there are many prospective clients that think this is the case when they decide not to proceed following our introductory meeting.

There are constant pushes from industry and regulatory bodies to enhance the professionalism of financial planners. As a result, we are now seeing fee structures include fewer commissions to minimise conflicts of interest. So, a fee-for-service model will become more common in future.

Since the GFC, financial planners are also expected to increase their compliance standards. For example, in our practice we keep file notes of every meeting. Even with prospective clients who do not proceed with any work with us, we can spend up to one hour on an initial meeting plus an additional 15 to 30 minutes typing out our notes. That’s up to 1.5 hours of unpaid work for only one prospect.

All these factors are likely to increase the cost of personal financial advice in the future.

But would you underpay someone to help you minimise tax, look out for investment opportunities, and manage your life savings and hard-earned dollars? Unless you’re fully confident of self-managing your finances, you are probably better off having a well-paid professional, answerable to you whenever you’re at a financial junction, at your call.

Kane Jiang (Dover Financial Advisers – AFSL no 307248) joined the financial planning industry in 2007 – just one year prior to the Global Financial Crisis! He has a Graduate Diploma of Financial Planning qualification and is also a Certified Financial Planner (CFP) Professional and a member of the Financial Planning Association (FPA) Australia.

The information contained in this document is general advice only and does not take into account your specific individual circumstances. Please contact AA Financial Planning if you are seeking personal financial advice suited to your particular situation.

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YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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