Financial Planners & Property

[VYBerlinaV8]

Hi FinSpec - good discussion we have going here.

I have a 'financial planner', simply because my bank refused to give me a margin loan to buy extra managed fund units without a consultation (which of course included registering me as a regular financial planning customer). I had done all the research into what I wanted, including checking the allowable gearing ratio for my fund. I had been in the fund for about 7 years.

So, I trot along to the FP, who is a young guy. He got the margin loan sorted (after some stuffing around), and we talked about strategy, during which time he seemed more interested in working out whether he could make some of my strategy work for him. Especially the property components.

Since then, I haven't had a lot to do with him. He rang me when I was getting margin called (twice - and both times I covered it with cash), but since then haven't heard a peep. I think he understands that I want to control the thing myself rather than be hassled by him.

I like the ladder metaphor referred to earlier in this thread, although I'd suggest that many people here are probably around the 5 to 7 mark, with most FPs around the 3 to 5 level. The people at the sub 3 level are those who don't seem to understand that you need to spend less than you earn to get ahead. I'd call myself about a 6, and I think that's probably high enough to meet my goals in my target timeframe, although I'll never deliberately stop learning.

I guess I am the sort of investor who thinks a lot about managing risk, and about generating reliable long term returns rather than playing short term positions. That's just me, and I'll freely admit there are people who have become wealthier than me using different strategies. For example, the fund I use is a fairly well known one, and I have been quite happy with its returns over the past 8 years. At my current level and contributions, it should have over a million dollars in it within the next 10 or so years, assuming average returns. Of course, I'll have to choose some new funds to spread my risk a bit soon.

But back to the point. My FP experience, and the experience of friends who have used FPs, has been oriented to advice around very risk averse strategies that are not taken in context with the clients' earnings, spending and tax positions. And yes - funds, funds, funds...

What would be good would be to offer a financial planning service that incorporated financial counselling and cashflow management, as well as picking up spending desires and tax planning. For 90% of Australians, this would be very valuable. For example, how many Joe Publics have even heard of tax withholding variations? How many know what negative gearing actually means, or when it is useful? What about franking credits? People don't need help choosing funds, they just need someone to show them the basics.

Thoughts anyone?

 

[steveadl]

What would be good would be to offer a financial planning service that incorporated financial counselling and cashflow management, as well as picking up spending desires and tax planning. For 90% of Australians, this would be very valuable. For example, how many Joe Publics have even heard of tax withholding variations? How many know what negative gearing actually means, or when it is useful? What about franking credits? People don't need help choosing funds, they just need someone to show them the basics.

Thoughts anyone?

Couldn't agree more. Anything to increase people's financial literacy - even the basics many take for granted - would benefit the individual greatly. Trotting off for a 30 min session to have some money plonked into MF's doesn't take an awful lot, especially if you can read the PDS's etc yourself.

Whether or not you can get a large amount of the people who need such education to admit that and see a MF to educate them may be a different story however?

Well said VY.

 

[pully]

Hi FinSpec - good discussion we have going here.

I have a 'financial planner', simply because my bank refused to give me a margin loan to buy extra managed fund units without a consultation (which of course included registering me as a regular financial planning customer). I had done all the research into what I wanted, including checking the allowable gearing ratio for my fund. I had been in the fund for about 7 years.

So, I trot along to the FP, who is a young guy. He got the margin loan sorted (after some stuffing around), and we talked about strategy, during which time he seemed more interested in working out whether he could make some of my strategy work for him. Especially the property components.

Since then, I haven't had a lot to do with him. He rang me when I was getting margin called (twice - and both times I covered it with cash), but since then haven't heard a peep. I think he understands that I want to control the thing myself rather than be hassled by him.

I like the ladder metaphor referred to earlier in this thread, although I'd suggest that many people here are probably around the 5 to 7 mark, with most FPs around the 3 to 5 level. The people at the sub 3 level are those who don't seem to understand that you need to spend less than you earn to get ahead. I'd call myself about a 6, and I think that's probably high enough to meet my goals in my target timeframe, although I'll never deliberately stop learning.

I guess I am the sort of investor who thinks a lot about managing risk, and about generating reliable long term returns rather than playing short term positions. That's just me, and I'll freely admit there are people who have become wealthier than me using different strategies. For example, the fund I use is a fairly well known one, and I have been quite happy with its returns over the past 8 years. At my current level and contributions, it should have over a million dollars in it within the next 10 or so years, assuming average returns. Of course, I'll have to choose some new funds to spread my risk a bit soon.

But back to the point. My FP experience, and the experience of friends who have used FPs, has been oriented to advice around very risk averse strategies that are not taken in context with the clients' earnings, spending and tax positions. And yes - funds, funds, funds...

What would be good would be to offer a financial planning service that incorporated financial counselling and cashflow management, as well as picking up spending desires and tax planning. For 90% of Australians, this would be very valuable. For example, how many Joe Publics have even heard of tax withholding variations? How many know what negative gearing actually means, or when it is useful? What about franking credits? People don't need help choosing funds, they just need someone to show them the basics.

Thoughts anyone?

i certainly agree with your comments particularly the last paragraph. how nice it would be to have all that information and guidance in one place. there are businesses that offer planning, taxation and legal advice but because of the complexity these days it would mean appointments with probably 3 separate individuals.

no generalists allowed because of the complex rules and regulations. so it is both time consuming and expensive to gather it all together.

can anyone remember when things were simpler albeit a long time ago. when people who were often new migrants, although not exclusively, had extensive property investments but did not talk about it much and made a good living?
it was done the old fashioned way but worked for them.

we can not go back to that time but it is a shame we have these levels of complexity now but of course it does provide employment for so many more people which i suppose is a good thing.
regards

 

[rugrat]

This is a very interesting thread. I think the problem is that you need to know what it is you are exactly expecting from the financial planner. For me they are simply a component of my own research, another person to bounce my ideas off and challenge my thinking. You need feedback, particularly anything that challenges, from other sources to ensure successful risk management. A financial planner is simply part of this risk management process for myself, As is posting on SS - I have changed my mind on numerous things after reading discussions on here or debating things with other members. I would never take anything anyone says as gospel (not from SS or from a financial planner), but I will consider what is said and the merit it may have.

I will certainly be seeking out a financial planner when I am ready to invest in shares etc, because I don't understand them any where near as well as I do property. Then again, 8mths ago I didn't understand porperty very well either.

 

[steveadl]

I will certainly be seeking out a financial planner when I am ready to invest in shares etc, because I don't understand them any where near as well as I do property. Then again, 8mths ago I didn't understand porperty very well either.

Small point Rugrat, but a financial planner won't be recommending shares to you (unless it's one of the few fee for service planners discussed above). They get paid for putting you into Managed Funds, not direct shares. I may be stating the obvious and you already know this, just making sure you don't expect to go to a planner and hear him say 'oh yeah some great places for your money at the moment are BHP, CBA, CSL' etc.

But this may change when the new regulations are established.

 

[rugrat]

Small point Rugrat, but a financial planner won't be recommending shares to you (unless it's one of the few fee for service planners discussed above). They get paid for putting you into Managed Funds, not direct shares. I may be stating the obvious and you already know this, just making sure you don't expect to go to a planner and hear him say 'oh yeah some great places for your money at the moment are BHP, CBA, CSL' etc.

But this may change when the new regulations are established.

Thanks, I didn't know this. The FP I have seen so far is a fee for service planner though... I think I will try and educate myself 'before' I talk to a FP in any case.

 

[FinSpec]

I would be wary of most planners that are making direct share recommendations. The reason why I mention this is that I believe that most planners should either operate as a specialists, or a general practitioner. The GP planner helps with strategy and the overall positioning of their clients, and they use specialists as and when required, such as a buyers agent for a property, a stockbroker for the share component, accountant for tax etc etc. No one is an expert at everything.

If all you are after is an idea on what shares to buy, I would refer you through to a stockbroker that has a good track record. I don't think that you can beat watching the market every day for years - they will have access to more research than most financial planners, and have much better experience. If, however, you are looking for advice on how to structure your share investment, tax, cash flow, allocations etc, then a financial planner would be the best to help with that.

I've never named a direct share that a client should buy. I've told clients how much they should spend on direct shares, if it should be Aust or local, how they should structure it, even if they should be focusing on blue chip, small caps, yield etc. But I always leave it up to people that I feel are better at it than I to make the call on the company. I have advisers that help me, and they are the same as the ones that have helped my clients.

And of course, if all you want is a managed fund, it goes without saying where you should go.

 

[JIT]

Haven't read all of the posts, but another point I would make is that finding a FP that is also qualified as an accountant and can give you tax advice is preferable to one that is purely a FP.

I know a few who are dual qualified and I've found that generally their advice is more useful than those without, who always preface their comments with ''but you'll have to see our accountant for that''.

I've generally only used FP's for their free 1 hour introductory consultations!

A good chin wag!

Some who aren't dual qualified have in-house accountants and a couple of times I've met with the FP and accountant at the same time for the first consult, which is not a bad alternative.

FinSpec, how do you manage this... do you refer to external accountants/have in-house ones/have accounting qualifications...?

 

[FinSpec]

Hi JIT,

It's a pretty normal thing these days to find an accountant that has taken up financial planning as well - the two professions go quite well together. While I'm not an accountant, I've probably had more training than many accountants on tax structures and tax strategies. There have been times in the past that I've had to spend time with a client's accountant to explain to them and teach them somewhat about the strategies that we've been using for their client.

I've never wanted to have in house accounting, becuase I feel that different accountants are going to be better suited to certain clients more than others. Our clients tax returns can vary from simple to very complex, then you have small business owners etc. So we refer out our accounting work to a network of accountants that we've done a lot of due dilligence on - and we work very closely with them.

We also find it of use sometimes when accountants can do some of the work that we can do for less - therefore we save our clients some money on fees. But at the end of the day, each person is different and is going to have different needs and it's the financial planners job to enusre that those needs are met (providing, that is, that the client has asked the FP for such help).

Hope that answered your question!