What is Financial Planning?

The Financial Planning Association (FPA) defines financial planning as the process of meeting your life’s goals through the proper management of your finances. Your life’s goals may include buying a home, saving for your children’s education and planning for retirement.

A good financial plan as suggested by the Australian Investments and Securities Commission (ASIC) should:

• Summarise your financial position
• List your goals
• Explain how you will reach your goals
• Show how carefully chosen investments mesh together as working parts of your overall strategy
• Disclose and explain any risks and how they can be become
• State all the costs
• Reveal the commissions your financial planner might receive from the investments they recommend

Download a copy of ASIC’s ‘Getting Advice’.

Benefits of financial advice

Quality financial advice can help you make informed decisions about your financial situation.

A Meritum financial adviser can help you determine your short and long term financial goals and suggest solutions to achieve them.

Benefits of financial advice include

• Helps protect and build your income or investments
• Assists you to plan major changes in your personal circumstances e.g retirement
• Accurate information about changing laws and investment markets
• Notification and access to new investment opportunities
• Gives direction and meaning to your income or investments
• Opportunity to build a relationship with an expert
• Access to up to date research and market insights

A Meritum financial adviser can help you determine your short and long term financial goals and suggest solutions to meet them.

How does a financial adviser help you?

The Financial Planning Association (FPA) suggests a financial adviser can assist you:

• Develop a sound financial plan
• Make your money work to your best advantage
• Suggest financial products that are tailored to your needs
• Educate you to understand risk and determine your personal risk profile

Thinking you need advice?

You may need advice if you:

• Have a complex financial situation
• Have been made redundant
• Have a portfolio and you’re looking to build a strategy or plan
• Don’t have the time of knowledge to manage your portfolio on an ongoing basis
• Have received an inheritance or windfall
• Have received a lump sum
• Are new to investing and want to turn your savings into investments
• Are changing jobs
• Are nearing retirement
• You want to make sure your family is protected if something happens to you or your partner
• You are single again after a long relationship, due to divorce or the death of your partner
• You are starting a new business
• You are planning a major life change such as marriage or retirement or moving house.

Who doesn’t need help? Source FPA

Not everyone needs advice. If you are confident that you have an effective strategy in place, then you may not need professional advice. For example the FPA says:

• If you want to deposit some money for a short period in a term deposit or cash management account, or another investment with a guaranteed return.

• If you just want someone to carry out a share transaction for you. In that case, the Australian Stock Exchange (ASX) can refer you to a qualified and licensed stockbroker. Call 1300 300 279 or visit the website www.asx.com.au

• The decision is yours, but if in doubt, it is wise to have the benefit of financial advice.

How much does financial advice cost? Source FPA

There is no set amount that a financial planner will charge. It depends on how complex your financial situation is and the level of service that the financial planner provides. Some planners may charge you directly for their services: others may be reimbursed by their employers or by the providers of products that you may invest in. Many will not charge you at all for the first meeting. Check their Financial Services Guide (FSG) for details. Your financial planner will prepare a Statement of Advice which will detail all fees and charges payable to the planner, both from commissions and fees.

As a general rule fees can include:

• A flat dollar amount
• An hourly rate: and/or
• Commission on the amount you invest
• Some financial products have fees built in, and the payments may be passed on from these to the planner
• You may be charged an initial fee for advice received and an ongoing fee per annum for additional planning each year.

Some financial planners only use one fee basis, but many use a combination of the above. Many financial planners also charge separately for the initial plan and for the ongoing work.

For example:

Initial advice $2,000-$4,000

Implementation 1% of assets invested

Ongoing advice

Trailing commission 0.6%-1% (usually paid out of investments)

This is an example only – the cost of advice varies according to the level of complexity of your situation, and the services offered. It may vary widely from the example given.