What does a financial planner do?

Ben Brett 1 February 2020

A recent report from Roy Morgan suggests that 90.3% of Australian’s 14 and over have never used a financial planner. Given such a large portion of Australia have never seen a financial planner, an obvious question is ‘what does a financial planner do?’

Financial planners are not a one size fits all- there are lots of different ones

Financial planners usually come with their own interests and specialities. For example, there are financial planners who:

  • Help you with life insurance only (sometimes called insurance brokers)
  • Focus solely on trading shares (sometimes called stockbrokers)
  • Will only help you with your superannuation (usually these are financial planners focussed on retirees)
  • Will only help ultra-high net worth individuals (sometimes called Asset Managers or Private Wealth Managers)

They are all different which makes the process of choosing a financial planner very challenging!

Here at Bounce Financial, we consider ourselves ‘holistic’ financial planners. This means that we look at all aspects of your finances. In particular, we specialise in helping high income professional families who are navigating life’s big financial transitions.

I’ll explain what we do here at Bounce Financial and some things to look out for for when meeting with a financial planner.

1. Budgeting and Cashflow

Of all the areas where financial planners help, the one that varies the most between financial planners would be around budgeting and cashflow.

At Bounce Financial, we believe that any good financial plan starts with working out how much your life costs to live and automating your finances. Only once you’ve done this, can you work out how much you have to save and invest.

What we do:

  • We work with our clients to come up with a budget and set up accounts to automate this budget.
  • We provide regular ‘spending reports’ to track how you are going against this budget so we can adjust your financial plan.
  • If you’re not spending as much as we expected, we can increase your investments or other savings goals. If you’re spending more, we have a discussion about how to adjust your financial plan to suit your lifestyle.

Things to look out for:

  • Many financial planners won’t help you with your budget or coming up with strategies for your cashflow. Their role is to simply invest any amount you save.
  • This approach can suit people who have a very strong grasp on their finances and are willing to do more hands-on work in engaging with their financial planner about how much they have to invest.

2. Decision Forecasting

A lot of our clients already have a good grasp of their budget. They earn good money and they are trying to figure out how to take the next step to utilise it. This is where decision forecasting comes in.

As part of our financial advice, we map out what the next 10 years of your life looks like from a money perspective. This means how much money is coming in (salaries and investment income) and how much is going out (Expenses).

We then run different scenarios. An example might be:

  • What if you bought a house for $1,500,000 instead of $1,000,000?
  • What if you took 6 months of maternity leave instead of 12?
  • What if you bought the house AND took 6 months of maternity leave?

Whatever your various goals and plans are, we will forecast them out for you so you can make a decision about how to structure your financial plan.

Setting up a budget can be easy, but working out how to combine all the competing financial goals and plans you have isn’t.

What we do:

  • We map out the next 10 years of your life and what your income and expenses are likely to be.
  • We run a few ‘scenarios’ where we show what different decisions like buying a house, starting to invest, retiring early or having a baby will do to your finances.
  • This helps you to make a decision about how to structure your financial plan.

Things to look out for:

  • Only some financial planners will go to this level of detail when providing you with financial advice.
  • This suits people who are younger (i.e. not deep into retirement) who have a lot of decisions to make. If you are retired and have settled on what you want to do for the rest of your life, this level of review likely won’t suit you.

3. Superannuation

Most financial planners (excluding those who do insurance only) should be able to help you with your superannuation.

A good financial planner will be able to help you consolidate your super, select a low-cost super fund and help you pick investments that suit your needs. They will also work out whether you have enough in your superannuation and how much extra you could contribute to reduce your tax and to save for retirement.

What we do:

  • For clients who have the capacity to do so, we will recommend contributing additional amounts to superannuation so that they can reduce how much tax they pay.
  • We will recommend a low-cost super fund with investments that suit your timeframe to retirement.
  • For some clients, we help them pick investments that are ethical and align with their values.

Things to look out for:

  • Some financial planners will help you to set up a Self-Managed Super Fund.
  • These come with a lot of benefits including the ability to invest in residential investment properties.
  • These come with substantial fees however and don’t suit most people because of their significant costs.
  • If a financial planner recommends you set up a Self-Managed Super Fund and you are unsure, you should seek a second opinion. These are serious things that can have serious consequences if you get them wrong.

4. Investments

You’ll be surprised to know that not all financial planners can help you to invest your money. In fact, a lot of financial planners can only help you with your insurance and superannuation.

For our clients who have bought a house and are wondering what to do next, the general answer is to start investing. Whilst we think it is important to pay off your house, we think that dedicating some of your excess savings towards investing can give you the best of both worlds.

What we do:

  • We recommend investments which suit your goals and timeframes for investment.
  • We focus on low-cost, diversified investments with a focus on regular income and growth.
  • We aren’t focussed on high-risk, high-return investments as we are about sensible investing.
  • As part of your financial plan, we work out exactly how much you should put towards investments and put this in place for you.

Things to look out for:

  • Every financial planner has a different investment philosophy.
  • Some are high risk and some are very conservative. Some trade shares and some only invest locally.
  • When speaking with a financial planner, ask them to explain their investment philosophy to you. If it doesn’t make sense or doesn’t feel right, seek a second opinion.

5. Life Insurance

A great financial plan only works whilst you can earn an income. If you were to get injured and be unable to work, then your financial plan falls apart. That’s where life insurance comes in.

A financial planner will help you with your:

  • Life insurance.
  • Total and permanent disability insurance (if you couldn’t work again).
  • Trauma insurance (a lump sum if something traumatic happened to you).
  • Income protection insurance (pays you a wage whilst you can’t work).

What we do:

  • For our clients who usually have a mortgage and family, insurance is important.
  • Most of your insurance can be paid for from superannuation which can be helpful when you are balancing all of the other demands on your cashflow.
  • Insurance that comes automatically in your superannuation usually has a lot of restrictions. We help clients to apply for insurance so that they can ‘lock it in’ and be confident should they ever need to claim on the insurance.

Things to look out for:

  • Insurance is complex and has a lot of weird rules associated with it.
  • As a general rule, the insurance that your super fund provides automatically without you having to apply for it, can have restrictions which you only find out about when you go to claim.
  • You never want to find out your insurance is not up to scratch at claim time, it’s worth comparing them now.
  • Comparing insurance is difficult and can involve you having to compare the insurance terms, this is where an expert can really help.

6. Other ‘ad-hoc’ things we do

Whilst these are the major things we do for our clients, there are a large number of other things we do throughout the year.

Our job is to be your ‘finance guru’ which you can call anytime something happens in your life which may have a financial impact (fyi this is most things!). We also identify a lot of these proactively and contact you when we think you could benefit. These times include:

  • When you want to buy a car or enter into a car lease.
  • When you change jobs.
  • At the end of the financial year to work out what you can claim on tax (some insurance and super contributions are tax deductible).
  • When you decide to have a child (to update the financial plan).
  • When you want to start saving for renovations.
  • When you start a new job or want to start a business.
  • When your superannuation fund or insurance company sends you a letter about changes (this happens multiple times a year).
  • When laws or rules change which may affect you.
  • When you need to take steps to care for your parents.
  • When you want to start investing.
  • When you want to review your salary sacrifice arrangements (this is especially important if you work for a non-profit or in the health care sector).
  • When you need to claim on your insurance or are wondering if you can.
  • When you want to buy a house.

So what does a financial planner do?

Well, if I was to summarise it, a financial planner should help you come up with a life plan and help you to execute on it. As your life changes, your financial planner should be there to adjust your plan and make sure you’re always working towards something.

A good financial planner looks out for issues or roadblocks that could appear and helps you to avoid them. They will coach you and provide you with guidance so you can live a life that’s filled with the things you love.

They are the people you can outsource some of your financial worry to and they will help you to be excited and empowered about your financial future.

Yes, they will help you with investments but that’s only a very small portion of what a financial planner does. As always, if you have any questions, please reach out.

This post is from our resident Financial Planner Ben Brett, check out his details in the About Us section.

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Posted in: Ben BrettFinancial Planning

About the author: Ben Brett

Ben Brett owns and operates Bounce Financial with his wife, Cara. Having started his career as a Corporate Lawyer, Ben has always had a passion for helping make the complex things simple. Follow Ben on LinkedIn at www.linkedin.com/in/ben-brett/