Is it time to engage a financial planner?

My wife and I have two boys, a 3 and a 4-year-old.

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I always find it fascinating to think about the impact we are having on them, which of my bad habits/mannerisms rub off on them and if, as parents we are doing a good job or not, as really – we are just making it up as we go.

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One of the things I worry about is how am I ever going to teach them about money?

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This may seem interesting coming from a financial planner who talks about investments and money all day long, but physical cash is almost non-existent these days.

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How will my kids fully understand money when all they ever see is me tapping a piece of plastic or even just tapping my phone on another piece of plastic whenever we buy anything? How will they ever learn the value of a dollar if they can’t physically see it?

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When I was growing up, I would get pocket money for doing certain chores. If I didn’t do the chores, I wouldn’t get it. Simple!

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I had a piggy bank where I could physically touch the money I had earned and watch the dollars and cents grow as I saved. I could pile up the coins and sort them into their different shapes and colours (big and small, gold or silver) but how are my kids, or even more so, their (future) kids, going to ever learn those same lessons?

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Although I had a fascination for money from an early age, which probably explains why I am in the career that I am, I never really applied myself to learning the finance “trade” until halfway through university. Even then, my own personal spending habits didn’t really improve until my late 20s.

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With the benefit of hindsight, I wish I had seen a financial planner straight out of school as I now completely recognise and appreciate the monumental impact this could have had on my financial life.

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What does a financial planner do?

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There are lots of words that could be used to describe what a financial planner actually does, but I think the best words to describe it would be financial coach.

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I use the term ‘financial coach’ because a great financial planner really should be there to hold your hand along your financial journey, ideally from as early as possible. The sooner you can start building better habits and being more conscious of your investments the better off you will be later on.

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A financial adviser is there to make sure that you don’t make too many mistakes and if you do make a financial mistake, that you learn from it and get back on the horse again (so to speak). Just like a good sport coach they should be able to pep you up when things aren’t looking so good and be able to help you see the bigger picture and avoid making decisions based purely on emotion when planning, history and good evidence might suggest a different course of action.

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A financial adviser can assist with things like:

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• Determining whether you should be making additional contributions to your super
• Planning for a house purchase or helping you to pay off your house sooner through extra repayments
• Determining how much income you need (and want) in retirement and understanding, based on your current situation, when you could retire comfortably
• Helping you navigate through difficult times in financial markets

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There are lots of different reasons that you would use a financial planner including:

• Managing your superannuation
• Wealth Management outside of superannuation
• Strategic Financial Planning: with the aim to have your investments operating more tax-efficiently
• Retirement Planning
• General Investment Advice

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Anything finance-related can very quickly become quite overwhelming, but with the help of a financial planner, the path becomes a lot easier and a lot clearer with much less anxiety.

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In my opinion, financial planners help you to work toward your goals, and more importantly, help you define those goals which in turn allows you to take steps to start working towards them.

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Without a financial strategy, you’re pretty much just playing golf in the dark. You need to know where that ball is to hit it in the first place and then you need to know where it is heading!

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On a few occasions, I’ve been told by people, who aren’t clients (or who aren’t yet clients), how well they have done financially over their working life and I am always genuinely pleased for them. Hard-working people deserve their success. However, when I quietly think through some of their decisions, I realise how much better they would have done with some financial advice. Even in the same business or career circumstances, I can see even more clearly the immense value that a broad financial strategy would have brought to them.

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Financial planners can also simply just hold your hand through the tougher times in the economy. When newspapers and the media are telling you that markets are going to crash, that it’s all doom and gloom, and the sky is falling, a financial planner’s purpose is to be the voice of reason.

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The Benefits of a Financial Planner

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Seeking the guidance of a financial planner is a means of organising your financial life and handling your financial affairs in a more efficient manner.

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With a wealth of experience and qualifications, it’s only logical that financial planners should know more about finances than the average person.

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Typically, a financial planner will take the time to understand your overall lifestyle and financial position. This way, they can identify exactly the areas they can support you with and provide you with the confidence that your finances are in good hands.

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The biggest benefit of a financial planner is their ability to take the emotion out of investing.

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One of the first things I learnt at university when studying finance was that one of the biggest problems and biggest detractors from financial performance is your own human emotion.

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Emotion can play tricks on you, especially when it’s your own money. The benefit of a financial planner is that because it’s not their money, they can be that voice of reason you need and approach things objectively. They are not going to get emotional; they’re not going to make emotional decisions with your money – they’re going to make rational decisions with you.

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They also take the emotional stress out of the whole process. A good financial planner should be able to make you feel a lot more comfortable about your finances. They should make you feel confident that you are heading in the right direction but also, if at any time you feel like you are not heading down the right path, they can help you know what steps you need to take to get back on the right path – no different from a personal trainer with your fitness.

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Financial Planners: The New Personal Trainers?

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For those who aren’t quite as fit as they would like to be right now (myself included!), it’s a logical next step to give your personal trainer a visit. If you’ve ever used a personal trainer before, you know that one of the first things they ask you is, “What would you like to achieve?”

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And if your answer is ‘weight loss’, they will tell you what steps you need to take to lose weight. If your answer is ‘to put on muscle’, it’s a completely different plan but, they will give you the plan to get there.

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This is absolutely no different from a financial planner or financial coach. Your job is to decide on what outcomes you’d like to achieve and a financial adviser can tell you if it’s achievable or not. If it is, they will share the exact steps you need to take to get there.

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The right time to get financial advice

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As a financial planner working across Sydney, Brisbane and the east coast of Australia, here are two of the most common questions I get asked:

1. How do you know when you need a financial planner?
2. When is the right time to get financial advice?
   
   

I personally believe that it’s always the right time to see a financial planner, particularly once you start to have a reasonable income but perhaps even before that to establish financial discipline.

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The idea of financial planning becomes particularly relevant when you have more assets and a higher income. Essentially, if you’re in this position, the stakes are higher. After all, if you have more, you have more to lose if you don’t manage it properly.

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The most powerful thing anyone has on their side is time.

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Arguably, the earlier that you see a financial planner, the more impact they can make on the end result, purely because of the law of compound earnings.

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Maybe you’re just feeling a bit nervous or unsure about how your finances are going or whether you’re making the right decisions? A financial planner can give you peace of mind whether you’re on the right path or not.

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Life Stages to Seek Financial Advice

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Over your life, you are likely to go through many different stages. If your circumstances have changed and you’re earning more money than previously, you might like to get some financial planning advice. There may be a potential for you to put some extra money into your super but maybe that’s not the most effective use of your money?

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I think certainly by the time you hit your late 20s and early 30s it would be a good idea to see a financial planner. At this point in life, time is still on your side and if you start making good decisions now, you can make a huge impact on your life down the track.

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Most of the clients we work with come to us in their early 40s. This is a great time to see a financial planner because typically, you have an asset base, (which may or may not be structured properly) but now would be the right time to check on your financial arrangements and also to rectify any defects or bad habits that you may have.

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From your forties, you still likely have around 20 years to retirement, which means that the right financial plan has the potential to make a very big impact on your future.

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If you’re looking to sell a business or have just sold your business, this is a great time to seek financial advice. At this stage, it would be a very good time to see a financial planner (along with an accountant). The sale of a business usually involves receiving a large capital sum, often the largest amount in your lifetime. What is the best use of this capital?

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The closer you get to retirement it is even more crucial to see a financial planner to work out a strategy for your super, and possibly other assets, to pay you an income after you stop working.

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However, it’s also important to know it’s never too late to seek out financial advice either. Even if you have already retired, you may still have 30, 40 or even 50 years left of your life. Financial advice could still make a huge impact given whatever funds you have accumulated at that point will have to last several decades longer.

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No matter what stage of your life or career you are in, if your financial circumstances or goals in life have changed, that is when it is time to seek financial advice.

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How much do you pay a financial planner?

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There are a number of different models as to how financial planners are remunerated.

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At Emanuel Whybourne we are licensed and authorised to provide advice to wholesale clients, professional and sophisticated investors.

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This need not sound daunting. If an Accountant provides a Certificate that you have at least $2.5M in assets or an income of at least $250,000 in each of the last two years, you can receive advice as a wholesale client.

Our clients will typically pay us a percentage of the value of the investment portfolio that we’re managing for them. This gives them unlimited access to us without turning on the “clock” for additional fees when further work is required. We also do not base our fees on every transaction such as a Stock Broker might do. Other financial planners may change fixed fees or sometimes an hourly rate for work done.

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We lead by putting our clients first in every decision we make.

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Our team at Emanuel Whybourne provide strategic investment advice to high net worth individuals, families, foundations, and institutional investors.

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Our Financial Advisers will undertake a holistic review of your financial position, focusing on diversification opportunities, structure, asset protection, tax efficiency, and accommodating your inter-generational wealth ambitions.

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If you think now might be the right time for you to get advice, please reach out to us. We would be delighted to meet you.

Until next time,

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Tim

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