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What is financial planning?
Financial planning can help you achieve your financial
goals and accumulate wealth faster.
This section is designed to introduce you to the benefits
of financial planning. If you want to make your money
work harder, and if you want a secure and financially
independent future, then please read on…
What is financial
planning?
According to the Financial Planning Association of
Australia (FPA), financial planning is the process of
achieving your lifestyle goals through the proper management
of your finances.
Thinking of buying a home, a holiday home or an investment
property? Perhaps you are saving for your children's
education, managing debt or planning for an early retirement.
These are all lifestyle goals. Careful planning is essential
in helping you achieve your lifestyle goals. That is
where your financial planner can help. 
How can financial
planning help you create wealth?
A financial planner can show you how to:
- determine the right investment strategy for you
- select the right investments
- pay less tax
- package your salary effectively
- save on interest payments
- use debt to your advantage
- choose the appropriate level of insurance cover,
and much much more.
Why should
I talk to a financial planner?
Managing personal finances is not easy. It’s like
making your way through a complex maze. How do you choose
appropriate investments? Do you understand all the tax
implications of investing? These are only some of the
issues that you need to consider when you are trying
to manage your finances. Most people have neither the
time nor technical expertise.
Financial planners undergo extensive training and are
licensed to provide advice on areas such as:
- wealth accumulation
- investment strategies
- insurance options
- superannuation
- redundancy
- estate planning
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- debt management
- gearing strategies
- taxation planning
- retirement planning
- social security
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Reach your
goals in 6 easy steps!
The financial planning process generally involves 6
key steps. By following these steps, you get an understanding
of where you are today, where you want to be in the
future and what you need to do to get there. These steps
are:
- Collecting your financial data - such as details
on your income, debt level, commitments, etc. –
to determine your current financial position
- Collectively identifying and then prioritising your
lifestyle and financial goals
- Outlining any financial issues or hurdles that may
prevent you from reaching your goals
- Preparing your financial plan with the appropriate
strategies to help you achieve your goals
- Implementing your financial plan once you have understood
and are comfortable with the recommendations
- Reviewing and revising your plan at least annually
to ensure it stays on track even if your personal
circumstances change
How to choose
the right financial planner?
When choosing your financial planner, make sure they
have all the necessary skills and qualifications; and
they represent a reputable organisation committed to
servicing its clients’ long-term needs.
Financial planners must meet the following criteria:
- member of the FPA:
the financial planner you choose must be a member
of the FPA. Members of the FPA must abide by their
code of ethics and rules of professional conduct
- registration with the Australian
Securities and Investments Commission (ASIC):
the financial planner must be registered with ASIC
and be a licensed dealer in securities or be an authorised
representative of a licensed securities dealer
- supply a Financial Services
Guide (FSG): a FSG details fee structures
and the range of services they offer. It is a legal
requirement for the financial planner to supply you
with an FSG
- have appropriate qualifications:
at a minimum, financial planners must hold a Diploma
of Financial Planning. Some financial planners may
also be titled Certified Financial Planners (CFP).
The CFP is an internationally recognised mark and
is a symbol of the highest level of professionalism
for financial planners
- disclose all sources of remuneration:
financial planners must disclose all sources of remuneration,
commissions or brokerage they will receive on the
amount you invest. A good adviser will recommend the
right investments for you rather than try to get you
into products just to get a higher commission.
Why have an
annual financial health check?
Once you have had a financial plan prepared, it is
important you have an annual financial health check.
Life changes rapidly, and these changes can affect your
personal and financial circumstances in a short period
of time. Some of these factors you have some control
over and others are beyond your control.
Let’s look at some examples that can affect your
financial plan:
| Personal
factors |
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External
factors |
- getting married
- having children
- getting a divorce
- being made redundant
- paying for children’s education
- getting a promotion and pay rise at work
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- changes in superannuation legislation
- changes in taxation legislation
- rise and fall in interest rates
- effects of inflation
- economic cycles
- investment performance
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As you can see, you would have some control over some
of the personal factors. However, the other factors
are beyond our control. As we all lead busy lives, most
of us don’t have the time or expertise to keep
up-to-date on all these changes and the impact they
could have on our financial goals.
A review of your financial plan by a financial planner
is a straightforward yet worthwhile process. It typically
involves:
- open two-way communication with you
- reviewing progress in achieving your financial goals
and revising the strategies as required
- tracking your investments and analysing the investment
performance to date
- providing you with information on new investment
opportunities
- informing you of any external changes that will
affect your financial plan then making necessary adjustments
How to contact the
FPA?
You can contact the FPA either by visiting their website
on www.fpa.asn.au
or by calling 1800 626 393.
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