Financial Planning
What is Financial Planning?
Financial planning is the process of meeting your life goals through the proper management of your finances. Life's goals can be anything from buying a home, saving for your child's education or planning for retirement.
The financial planning process consists of six stages that can help you take a look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what steps are necessary to obtain your goals. The six step process involves gathering relevant information, setting life goals, examining your current financial situation and coming up with a strategy or plan for how you can meet your goals, given your current situation and future plans.
"There aren't enough hours in the day"
How often do we say this to ourselves? "The time pressures we're under are enormous, and we simply don't have the time to do it all."
The Benefits of Financial Planning
Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. A good example is when buying a particular investment product, it may help you pay off your mortgage faster or it may delay your retirement significantly. By analysing each financial decision as part of a whole, you can consider its short and long-term effects on your goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.
Most of Us Don't Have the Time or Expertise
Everyone relies on doctors, mechanics, dentists, lawyers, etc.... because they need those professionals' expertise. Yet with their personal financial affairs, a lot of people take a "do-it-yourself" approach - at the end of the day it can be costly.
Advisers Who May Work with You
Our aim is to have the friendliest of relationships with other professional advisers and to work actively with them so that our clients receive the full benefit of each adviser's expertise. On of our functions is to coordinate the expertise available and bring everyone together in a comprehensive plan which can be implemented in a sensible and structured manner.
Stockbroker
Stockbrokers are licensed to buy and sell securities products such shares and property securities which are listed on a Stock Exchange such as the ASX. They generally earn commissions on client transactions. A stockbroker must be a member of a participating Organisation of the Australian Stock Exchange Limited (ASX), or be an Authorised Representative of an Australian Financial Services Licensee (AFSL).
The Financial Planning Process
The Financial Planning Process consists of the following six steps:
1. Establishing and defining the client / financial planner relationship.
The financial planner should clearly explain or document the services to be provided to you and define both his and your
responsibilities. The financial planner should fully explain how he will be paid and by whom. You and the financial planner
should agree on how long the professional relationship should last and on how decisions will be made.
2. Gathering client data, including goals.
The financial planner should ask for information about your financial situation. You and the financial planner should
mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant,
how you feel about financial risk. The financial planner should gather all the necessary documents before giving you
the advice you need.
3. Analysing and evaluating your financial status.
The financial planner should analyse your information to assess your current situation and determine what you must do to
meet your goals. Depending on what services you have asked for, this could include analysing your assets, liabilities and
cash flow, current insurance coverage, investments and tax strategies.
4. Developing and presenting financial planning recommendations and/or alternatives.
The financial planner should offer financial planning recommendations that address your goals, based on the information
you provide. The financial planner should go over the recommendations with you to help you understand them so that you can
make informed decisions. The financial planner should also list your concerns and revise the recommendations as appropriate.
These recommendations should be presented to you in a clear, concise and understandable manner in a written document known
as a 'Statement of Advice' (SoA).
5. Implementing the financial planning recommendations.
You and the financial planner should agree on how the recommendations will be carried out. The financial planner can carry
out the recommendations or act as "coach", coordinating the whole process with you and other professionals such as attorneys
or stockbrokers. In the interest of "objectivity" or because of a lack of proper licensing, some advisers offer no help in
this important area. We believe good advice is most valuable when it is actually implemented.
6. Monitoring the financial planning recommendations.
You and the financial planner should agree on who will monitor the progress towards your goals. If the financial planner is
in charge of this process, he should report to you periodically to review your situation and adjust the recommendations, if
needed, as your life changes.
Common Mistakes Consumers Make When Approaching Financial Planning:
1. Don't set measurable financial goals;
2. Make a financial decision without understanding its effect on other financial issues;
3. Confuse financial planning with investing;
4. Neglect to re-evaluate their financial plan periodically;
5. Think that financial planning is only for the wealthy;
6. Think that financial planning is for when they get older;
7. Think that financial planning is the same as retirement planning;
8. Wait until they have a money crisis before beginning financial planning;
9. Expect unrealistic returns on investments;
10. Think that using a financial planner means losing control; and
11. Believe that financial planning is primarily tax planning.
Source: CFP Board Licensee Survey