Financial Planners - Not Really a Risky Journey

By Christine Jankus

Your car probably has four wheels, an engine, seats and gets you from A to B safely. You choose the manufacturer, the model, the engine capacity, how many seats it will have and what colour it will be on the basis of your research!  This is so whether your car is a small 4 cylinder run around, a family sedan, a good workhorse or a bright red Ferrari.

    Now ’lets face it, all of these cars will get you from Adelaide to Melbourne.  The question is at what speed and at what risk?

    A financial journey is the same.  You need to work out where you want to go and how fast you want (or need) to get there. But to get there in time, you may have to take risks.  The real questions are how comfortable are you with those risks and how will your financial planner guide you through them.

    But, in light of recent criticism why should you trust a financial planner?  In fact, Tom Collins recently asked the question are financial planners financial advisers or “frocked up product floggers”? (Source: Asset August 2003 page 14 John Fairfax Publications Pty Ltd ABN 33 003 357 720).   

    This is a fair question. 

    A financial planner should be able to provide you with a financial strategy to reach your lifestyle and financial goals within the limitations your personal circumstances bring.  This means that your planner needs to know you, know what risks you can tolerate and what investments to recommend to help you reach your goals.

     The choice of investments available to investors is huge.  In the past 20 years there has been an explosion in the number and types of investment products.  In 1983 there were only 10 equity trusts listed in Personal Investment (now Personal Investor) magazine, there are now literally pages of them! 

     The reality is that no planner can know enough about all the investments available in the market to make meaningful recommendations about all of them.  However, once they know which investments you are interested in, your planner must research that investment so that they can, if appropriate, justify your investment in it.  

     So if a planner cannot immediately recommend an investment that you are interested in, don’t despair.  It doesn’t necessarily mean that they are a product flogger.  It does mean that they need to do the research to see if a recommendation to invest is suitable to your personal circumstances.

     After all, it’s your journey.
    All this comes at a cost.  Some planners work on a fee for service, some charge an hourly rate and others charge commission only.  Those who do not charge commission will charge for the plan and then charge to implement any recommendations.  All will charge for reviews to your plan.

    Best practice is to charge separately for the written plan and implementation.  This means that the planner must produce a plan that meets your needs before they can move to the next step. 

     Once you choose a financial planner, they will have a number of jobs

        1.   To collect information from you.

Your planner needs this information to gain an understanding of your lifestyle and financial goals,  your present financial position, and the levels and types of investment that will meet your needs.

2.       To identify your goals and objectives.