One of the great mysteries for consumers of the financial services sector is ‘What does a Financial Planner actually do and when, or if ever would you need their services?’. In this article ROD LINGARD uses simple English to explain the how and why.

We know a mortgage broker will help you with to secure the right loan, and an accountant will lodge your tax return (and hopefully save you some tax!), but what about a financial planner?

Even a Google search doesn’t provide a comprehensive definition.

In fact, there is probably no one size fits all definition, so let’s talk about Financial Planning as number of steps.

Getting things started

The first step is all about gathering information.  Most importantly, what are your dreams, goals and aspirations?

Maybe it’s upgrading your house or buying an investment property.  Saving for childrens education may be on the agenda, or an overseas holiday.  Or maybe it’s ensuring that your retirement nest egg will be adequate.  As well as understanding your goals, a planner also needs to have a comprehensive understanding of your current financial situation.

Developing the plan

It might sound obvious, but the Financial Planner then needs to develop the plan.  They need to research the available strategies that can be put in place to make sure the goals are achieved.  It’s important to explore as many different options as possible.  A good Financial Planner will consider a range of strategies and work out the likely outcomes of all the available possibilities.

The moment of truth

With all the analysis and research done, now it’s time for the Financial Planner to share ‘the plan’ with you.

The plan should be a road map, showing where you are now, and how to get where you want to be, wherever that might be.  The plan will include the strategies recommended, and possibly some alternatives.  Most importantly, the plan should directly address your goals, and provide a recommendation for achieving those goals.

Putting it in place

Once the plan has been delivered and agreed upon, it’s time to put in all into place.  Depending on the complexity of the plan there may be quite a bit of paperwork to complete, but your Financial Planner will be there to guide you along the way.

Staying on track

Just like any journey, it can be easy to wander off course, or even face a road block that forces a slight change of direction.  By meeting regularly with your Financial Planner, it’s much easier to get back on track, or if necessary, navigate through any troubles that might arise.

That all sounds great, but why should I use a Financial Planner?

At the end of the day, whatever your goals may be, a Financial Planner’s role is to put you in a better financial position. In fact, Financial Planners have a ‘Best Interest Duty’ which means that any advice they provide must be in your (the customers) best interest.

A case study

What does this all actually mean in the ‘real world’?

I recently met with a couple in their late forties, who at first glance seemed like they didn’t need a Financial Planner.  They didn’t owe much on their home, had a couple of investment properties which were negatively geared, and had reasonably healthy superannuation balances.  All in all, things looked good.

Even though things were ‘pretty good’ the clients had two questions:

  • Could I estimate their position at retirement (and how much could they draw as income at retirement)?
  • Could they allocate their current cash flow in a better way (to improve their position at retirement)?

The result

After gathering all the information about their assets (including their superannuation), liabilities and repayments, I was able to provide a projection of their financial position at retirement, and the level of income they could expect.  The clients were pleasantly surprised to see that, for the most part, they were on track to reach their goals.

Despite being happy with the result provided by their current strategy, I looked at what might happen if they made some changes to their current cash flow schedule.  In short, I kept their outgoings at the same level, but changed the way their outgoings were allocated.  By keeping their cash flow position the same, I was able to recommend a strategy that significantly improved their financial position at retirement.

A meeting with a Financial Planner has given the clients peace of mind, and a strategy to improve their financial situation.

Rod Lingard is a Mortgage Broker and a Licensed Financial Adviser at Lifestyle Connexion and can be contacted on 07 3240 4800 or 0400 160 461. Financial Advice is provided by Rod Lingard – Authorised Representative No: 248734 of Hunter Green Pty Ltd | AFSL No 225962.

General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.

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Finance Management Why Should I Use a Financial Planner?