Financial advice, according to the Corporations Act 2001, means a recommendation or a statement of opinion, or a report of either of those things, that is intended to influence a person in making a decision in relation to a particular financial product.
And this seems to fit with how many Australians, and indeed our major financial institutions, see financial planning. In fact as many as 8 in 10 Australians do not use the services of a financial adviser. And who can blame them, I’m sure 8 out of 10 feel they do not need a financial product!
But financial planning is about so much more than selling products. Financial planning is about helping Australian’s live the life they aspire to. It’s about making better decisions regarding money, and let’s face it, this is not something that’s taught in school (it should be but that’s a whole other matter).
Here is a list of some of the aspirations we’ve seen from our clients in the past 12 months (this is why they want to work with us):
Strangely (or perhaps not so strangely), not one mention of wanting the latest financial product. A desire for financial products does not keep us awake at night, frankly because they are not that important to our clients.
What is important is working out how to fund the education we want for our children, or how to upgrade the family home, perhaps for you it’s starting a business once you exit the ADF or being able to walk Kokoda with your children? Clearly, there is no room for assumptions here.
Another startling fact is that most clients of financial planners are unable to determine if the advice they have received is good quality advice (trust in the industry is also at all-time lows). Well, here is a great clue. Does your financial planner know the aspirations, unique to you, that you want to achieve? And I don’t mean, “build wealth”, or “protect wealth” (these are terms financial planners like to use to sell you products), I mean your unique aspirations, just like the ones in the list above. A good financial planner should be able to show you how the advice they are providing will help you achieve ‘your’ aspirations.
A good financial planner will also want to talk about your aspirations every year, because our lives and the world around us are constantly changing and life is always full of uncertainty, so we need to make sure we are not making assumptions about why we are working together each and every year. If this sounds like it makes perfect sense, you would be right!
It’s also important that there are no conflicts of interest that could stand in the way of receiving good quality financial advice. Fortunately, ADF members have the benefit of the ADF Financial Advice Referral Program, so the leg work has already been done and finding an appropriate financial planner to work with is at your fingertips.
Talking to clients about their aspirations is tough. How many times in your life have you been asked about them (I’ll go out on a limb here and guess never)? Clients will often tell us “I don’t know, I’ve never thought about it!”
Take 15 minutes tonight (and get your partner to do the same, but do it individually, without discussion) and write down all your aspirations, anything that requires time, planning or money to achieve (including your bucket list) and then compare them, you might be surprised what you come up!
P.S These are the reasons you might seek financial advice.
Scott is a Canberra based financial adviser and a participant in the ADF Financial Advice Referral Program which lists advisers who operate free from remuneration-based conflicts of interest. The content of this article is purely educational and is not to be taken as personal financial advice.