News

If the Financial Planning Association of Australia (FPA) has anything to say about it, the educational standards for financial planners and advisers, in Perth and across Australia, are about to receive a boost. As far as we are concerned, it can’t happen fast enough.

Approved Financial Planners and AMP

We would like to give a little background. Approved Financial Planners and our parent company, AMP, are on the record as being in favour of educational reform for the financial services industry. We have felt for a long time that the standards for entering the industry, both in Perth and nationally, are not stringent enough.

AMP has internal standards that are far more stringent than industry minimums. That is one of the main reasons we decided to partner with them. We feel that it is our responsibility to educate ourselves fully about the products we offer and about how our decisions affect our clients’ well-being.

One of the sadder parts of being a financial adviser in Perth is listening to clients tell us how other financial advisers had mismanaged their funds, either out of ignorance or out of a lack of ethics. We find both of these situations to be unacceptable.

If you are new to financial planning, don’t feel bad; you have company. There are plenty of people in WA who haven’t taken control of their finances yet. Luckily, Approved Financial Planners can get you started on the right path.

Recently, the Financial Planners Association of Australia published a blog post discussing how to develop a financial plan and what factors should be taken into consideration. All of the factors they cited are factors that we like to take into consideration when helping a family develop a financial plan. Here are five crucial factors that we consider.

Your Priorities

Everyone’s situation is different. Everyone has different dreams and goals. Everyone is starting from a different position. Some people want to create more family time now. Some want to ensure their family’s future. Many figure out a way to carve out a good future without sacrificing their entire present.

Your Cash Flow

Since it is called “financial” planning, your financial position will mean a lot concerning the direction and scope of your plan. How much money do you currently make? How much can you afford to invest? Do you have a “buffer” in case something forced you to go without income?

In Perth, it seems like clients asking about financial planning are getting younger and younger. Many Australians in their twenties and thirties are already solidly on the way to retiring at the ages they choose to retire. We can’t give any specific financial advice without an individual consultation, but here are three strategies that can help a younger person get ahead.

Setting Financial Goals

The foundation of any financial plan is the goals. Once a person knows where they want to go, it is a lot easier to start taking steps to get there. We usually have our clients set short term goals, mid term goals and long term goals with the option of evolving them at any time.

The short term goal could be to start a savings account or purchase a first home. Mid term goals could be to own an investment property or pay for children’s college educations. The ultimate goal usually to retire at a specified age with a specified income.

Paying Off Personal Debt

Personal debt, such as store cards and credit cards, is expensive. The sooner expensive debt is paid off, the sooner a person’s money can start working for them as investment capital.

One of the fundamentals of good financial planning is diversification. Even in a market like Perth, which remained somewhat insulated from the worst of the Global Financial Crisis, all segments and sectors are subject to ups and downs. When a portfolio is subject to the ups and downs of any particular market, the dynamic is referred to as “volatility.”

While most markets are subject to ups and downs, it is a rare occurrence when every single market goes down at the same time. In a diversified investment portfolio, the investor isn’t affected as badly by one particular market going down, because the others usually don’t. Occasionally, when one market falls, another rises.

Diversification can provide a form of protection for investors and usually allows them to wait for any particular market to go back up.

How it Works

The popular way to diversify is to invest across asset classes. Examples: cash, fixed-interest bonds or securities, properties, shares and precious metals. Each class has its own risk to reward profile. Those with low risk and low reward, such as cash, are the least volatile. Those with the highest risk and reward potential, such as shares, are considered to be the most volatile.

We have provided financial services in Perth for nine years. In that time, we have built a track record based on honesty, integrity and results. When we get to know a client through an introductory consultation, one of the things we start out with is asking if they have done any investing yet.

Sometimes, we hear stories about how they got “advice” online or from well-meaning friends and it didn’t work out. We also hear stories about how they were “sold a bill of goods” by various financial advisors who provided “advice” that was just a cleverly-disguised sales pitch and was in their own self-interest.

Recently, a study led by Susan Thorp, Professor of Finance and Superannuation at the University of Technology, Sydney, indicated that financial advisors who give solid advice on the first issue are usually trusted, even if their later advice turns out to be bad. The study goes on to mention that there is potential for abuse by unscrupulous advisers who manipulate the process by providing easy, obvious advice to gain a client’s trust.*

Ms Thorp goes on to concluded that consumers “need more assistance in choosing advisers.” She also advocates tougher tests for certification as a financial advisor. Those who are interested in the full report can click the link at the bottom of the page.*