Financial planning requires attention to detail and a structured plan. By independent financial planner Tim Mackay.

Unfortunately, not only have recent financial scandals rocked the industry, there’s a lack of knowledge about what a financial planner can provide.

(This article was first published in Chartered Accountants magazine)

The revelations of the alleged activities of financial planners tied to Commonwealth Bank Financial Planning are a sad litany of failings, bad practices and unethical behaviour. These are a poor indictment on the dominant sales culture in large institutions, and a blight on the reputation of the emerging profession of financial planning.

So if you’ve ever questioned the professionalism of financial planning, you’re not alone. At my first local Chamber of Commerce board meeting, a fellow board member told me they were unsure if I was going to be “a salesman-type planner or a Chartered Accountant-type planner”.

They clearly understood the value a Chartered Accountant adds, a financial planner not so much. Truth be told, everyone thinks they ‘get’ what an accountant does. Maybe not in the specifics of any single role, but in the general sense that accountants do ‘tax, numbers, budgets and other financial sort of stuff’. Chartered Accountants are held in high esteem, and that’s great. In contrast, most people don’t understand what an ethical, competent and qualified financial planner does and the value they add. As a Chartered Accountant who proudly specialises in financial planning, here’s my perspective.

The need for financial advice

In an increasingly complex and uncertain financial environment, families need guidance from trusted and competent advisors to help them make smarter decisions about their money.

Protect your wealth

A doctor’s Hippocratic Oath includes the promise “to abstain from doing harm”. Similarly, a good planner first ensures your family doesn’t take any more risks than you have to. This includes avoiding high risk or tax-driven investments. It includes adequate insurance protection for peace of mind against loss or injury (note, a key word here is ‘adequate’).

Build your wealth

Hope, greed and fear cloud investors’ decisions. A good planner will create a barrier between emotions and investing, minimising mistakes, resulting in smarter investing decisions. They filter the ‘noise’ in the daily financial press to ensure you invest based on research driven insights. Clients are typically surprised by how important non-financial issues can be to their financial position.

Structuring to protect your assets, asset location and tax effective distribution strategies all add value. Key advice includes balancing the competing trade-off between mortgage reductions, investing, super contributions, and cash held for safety.

A good planner will ensure you understand what risk means for your family and how it can change through your life. They will devise appropriate strategies for your career progression or as you grow your business. A good planner will help you write your goals down, understand your approach to risk and return; and determine the minimum level of risk you need to take to achieve your family’s goals.

It sounds basic but it staggers me the number of senior people I know who work in the finance industry who don’t have a written plan. A well-written strategic plan will give you the confidence to make smart financial decisions, and help you avoid the whims of daily market movements.

Surveys show that investors who work with a planner are more likely to have a written strategy, are more likely to follow that strategy, understand how their investing decisions relate to their life goals, and are more confident about their financial future.

Finance your dream retirement

A good financial planner will help you confidently plan for your desired lifestyle in retirement. Andrew Peters, from Semaphore Private in Melbourne, puts it well: “Clients need to set ‘their number’ that relates to ‘their lifestyle’ (eg retirement income of $90,000 pa). Once they’ve set their number, we can establish ‘their target’ – eg $2.5m. Setting tangible targets is key to focusing clients on their goals”. Once that is determined, he goes on: “An advisor works with you to create a passive income stream which will enable you to support your desired lifestyle rather than facing the uncertainty of potentially having to work to support your lifestyle.”

Bring on reform

Clearly some financial planners have done things that are unethical and wrong, which has created a lack of public trust. As a financial planner, this saddens and embarrasses me. Consumers need a financial services industry that acts more clearly in the best interests of consumers, and treats them fairly.

Unlike some of my peers, I welcome professional reform in financial planning. I supported the FOFA reforms, I supported APES 230 and I argued there should be a ban on all commissions. I welcome the senate inquiry into ASIC and financial planning practices, because it will help consumers identify professional financial planners.


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