logo Loading...

What is the financial planning process?

Anyone who has not used a financial adviser before may be wondering if they really need one. Especially if they feel they are doing ‘okay’ without any help. Often this view is because many people who haven’t used a financial adviser previously, don’t understand the full spectrum of the financial planning process and relate it to just investment advice.

The financial planning process and the role of a financial adviser encompasses a whole lot more. When explaining the role of a financial adviser to someone who is not aware of our role, I often use the analogy of an architect. For example, when you are building a home you generally know they type of home you want, but an architect will provide advice on the best ways you can achieve your plans within the constraints set by building regulations and planning permission. Many architects will take on the responsibility of preparing details of the cost of the project, making sure it all runs smoothly, and getting in touch with builders for quotes.

Likewise, many people use a financial adviser for similar reasons, because they don’t have the time, knowledge or motivation to do it alone. Keeping up with the constant changes in laws and regulations regarding tax and superannuation, along with understanding property investment markets, and the track record of various investments, can be a real challenge.

Most people don’t have the time or patience to be up-to-date with all of these issues, but it is something financial advisers do everyday. At the same time, it does not mean you hand over total control to your adviser – you need to be comfortable with and understand any advice received.

Whether you are planning for retirement, an overseas trip, your children’s education, or for a deposit for property, a financial adviser can help you plan to reach these goals.

The financial planning process helps you assess your financial position and identify your personal and financial goals. Clearly setting out your goals puts you in a position to make better choices about how to achieve them.

In your first discussions with a financial adviser you’ll probably go over some basics to try and establish your current financial position and your plans for the short, medium, and long term. You should always ask questions to ensure you understand and are comfortable with the options being put forward.

When you are happy with what is presented, the adviser will develop a strategy, a plan, and investment recommendations, all detailed in a personal Statement Of Advice.

What does financial advice cover?

A financial adviser can help you in areas of:

Investment Planning

The goal of any investment plan is to grow your wealth. It may also include minimising your tax burden and working towards a steady and additional source of income for retirement. Investing in shares, either through direct shares or through a managed fund, is one avenue that many clients pursue in order to achieve these investment goals. Shares and managed funds are the same thing fundamentally, however with shares you pick your own companies and do your own research and come up with your own diversified portfolio. You can also do this with the help of a stockbroker. As long as you have enough cash to construct a well-diversified portfolio this is a viable option.

A managed fund is a professionally invested fund that pools money from many investors to purchase shares in whatever asset class you have chosen. So if you have decided to invest into a small companies managed fund, your money will be invested between many different small cap companies on behalf of you by the fund manager. Managed Funds can be an option for clients who don’t have enough cash to spread their risk with direct shares, or for clients who don’t have the time or research ability to put together their own portfolio. Managed Funds are also an excellent option to add boutique investment areas such as small companies, global equities, infrastructure funds and geared options to name a few to direct share portfolios.

Property Investment

Property investment planning involves looking at your overall portfolio to make sure that an investment property fits in with your current investments. It’s important to have a diversified portfolio that holds property, shares/Managed Funds and some cash, in order to reduce overall volatility. For some clients the majority of their share exposure will be in their Superannuation and this can call for diversification into an investment property in their personal names. Your borrowing capacity needs to be established and your cash flow checked and monitored by one of our financial planners. Property investment is not liquid and needs an outlook of at least 10 years in order to ride out the cyclical nature of property. It is an excellent, lucrative investment for the client that has time and cash flow on their side.

Retirement Planning

Retirement planning should start 4-5 years before you want to retire. This is to ensure that your adviser is working with your accountant to minimise any capital gains issues and income tax that may arise if you were to sell too many assets in the same financial year. A retirement planning adviser can also work with you to potentially maximise pre-tax contributions into Super in the lead up to retirement. It is important that your retirement plan is a well thought out process because it is going to set you up for the rest of your life. You may desire a transitionary period where you initially work part time, drawing a small pension from your Superannuation to supplement your reduced hours. When you do begin to draw an income from your Super, a Hudson Adviser will introduce you to our investment strategy; The Bucket Strategy. This is a system where we segregate assets into three theoretical buckets; a defensive bucket, a medium-term bucket and purely growth bucket. The growth bucket is your hedge against inflation but it can be volatile. The defensive bucket is there to fund short-term income needs. The medium-term bucket is used in the event of a prolonged downturn on the market. The bucket strategy protects you from having to sell down investments that may have experienced short term losses, in order to fund pension income.

A basic rule is that you need 70% of your pre-retirement income in order to live comfortably in retirement.

Tax-Effective Planning

Taxation can impact almost all aspects of your financial affairs, from your income, to your personal investments and Super, even to your insurance policies and your estate planning considerations. It is therefore extremely important to consider tax implications in your financial planning. A Hudson Adviser can consider using tax-effective “leveraging” to increase the growth potential of your investments but in a tax-effective manner. They can consider tax-deductible contributions to Super, tax-deductible insurance policies and the potential tax effects on your beneficiaries. We can work with your existing accounting or we can introduce you to an accountant that we work closely with. They can consider tax-effective structures such as companies, family trusts or a SMSF.

Superannuation Advice

For most Australians their Superannuation is the biggest asset outside of their own home. It is an excellent forced savings plan and the tax advantages, both in terms of pre-tax contributions and also the low tax rate on earnings, make it an excellent investment vehicle. It is so important that you look at your Superannuation as an investment vehicle and seek to maximise the return on the investments within your Super fund. Your Hudson adviser can help guide you to make the most out of your Superannuation and it’s important to know that there is no “one-size fits all”. A Hudson adviser can cater a portfolio to your specific needs and appetite for risk.

Personal Insurance

Personal insurance provides a level of security and peace of mind to you and your family should you suffer serious injury, total and permanent disability, loss of ability to earn income or even death. It’s a cover that you never want to use, but you pay for anyway, for the peace of mind that it brings and to protect you and your loved ones. It is important and in Hudson’s long history we have helped our members claim over $25 million in insurance benefits. If you don’t have personal cover and you have a family that relies on you, it’s critical that you make time to talk to Hudson’s insurance specialist.

Cash Management

Cash management/budgeting is the cornerstone of all financial plans. It doesn’t matter how you do it, whether it’s a weekly, monthly or yearly budget, the important thing is that you do it. The old rule of thumb is the 50/30/20 rule. Spend 50% of your income on essentials (rent/mortgage food, electricity etc) 30% on discretionary purchases (wants) and 20% saving (this can include Superannuation). You need to know what your cash flow is in order to be able to embark on any investment plan. 

Debt Consolidation and Budgeting

Debt consolidation involves rolling multiple loans into potentially one loan. It can make repayments and budgeting a lot easier. The repayments are often less, especially if you are using your home as security. If the same repayments are made this means the debt is paid off a lot earlier. There are some cautions, and your particular mindset needs to be evaluated to ensure that this just doesn’t free you up to go even further into debt. 

Key Financial Planning Strategies

Develop a wealth mindset and start now.

Understand exactly how you feel about risk. This is essentially the first step to any strategy as it will determine what sort of investments your wealth creation strategy will purchase. Taking appropriate risk when required is essential to a high growth strategy.

Investing is a great wealth building tool because you can compound the earnings.

Diversify your assets and sectors.

Leverage your wealth with borrowings, and invest appropriately as this allows your earnings to be magnified.

Dollar average into the sharemarket, this strategy is used to attempt to lower the average price paid for the investment.

Pay your self first, start with paying yourself 1% of your income, and every few months increase this in increments of 1%. You wont miss the income this way, it will creep up on you, until you are paying yourself as much as possible. Invest this into investments that are hard to access.

Try to keep your mortgage within 30% of your gross income, that will leave 70% or more for living and investing and as a rule of thumb, this should not see you fall short on repayments as interest rates and your life change through the years.

Self discipline is what helps set you up to whatever you determine wealthy to be in the first place. Self discipline and a wealth mindset lead to passive income in the future.

A young person, not yet married, embarking at the start of their working life could attempt to fund their lifestyle with just 20% of their income. Dollar average 50% of your income into growth-focused funds that have a long term horizon, use 10% for opportunities, potentially higher risk ones, and 20% for a deposit for a house, travel, marriage etc. Never draw on your funds and with time and compounding on your side, you will have set yourself up for life.

It’s time in the markets, not timing, and today is the right day to start, if not yesterday!

There is always the stock that goes up 200%, think Netflix, Dominos, Tesla, Bitcoin…to name a few! BUT creating wealth is about a longterm appropriate asset allocation strategy that’s designed to grow during good times and weather the storm during the bad. You wont create wealth by jumping in and out of the markets. Develop a strategy and stick with it.

The primary reasons for using a Financial Adviser/Planner

  1. Building your wealth — A financial adviser will help you build a wealth creation and wealth management strategy that enables you to meet your day-to-day living expenses, manage your debt, and is tax-effective. Strategies may involve borrowing to invest, accelerating your savings, and making the most of your superannuation.
  2. Making debt work for you — Managing debt appropriately can provide great returns. An adviser can help with strategies involving debt consolidation, increased frequency of mortgage repayments or even borrowing to fund investments. An adviser will also assess these options in conjunction with your goals and the level of risk you are comfortable with.
  3. Tax strategies — When developing strategies, an adviser will look at tax strategies to ensure you get the most from your investments.  Such strategies may include income-splitting, salary sacrificing to superannuation, gearing and tax effective investments.
  4. Protecting your wealth — Unexpected injury or illness can dramatically change your world.  An adviser can help you establish measures to protect your wealth, through suitable risk insurances, to ensure a financial safety net is in place to enable you to be sufficiently prepared to support yourself, and those depending on you, should something unexpected happen.
  5. Facing redundancy — An adviser can help you invest your payout to ensure it delivers long term benefits in a tax effective manner.  They will also be able to identify if you will be eligible for government benefits and advise you on how to manage your superannuation during this change. With all of these issues taken care of, you will be free to concentrate on your next career move.
  6. Preparing for retirement — An adviser can help you determine the level of savings you will need for retirement and provide advice on strategies that will deliver the income you will need throughout retirement. Such strategies will include advice on superannuation, government pensions, and options around employment where applicable.
  7. Financial health check — You may feel that you have implemented sound strategies but just want to ensure all aspects of your financial situation are in order. An adviser can review and identify areas of your finances that are healthy and strong, and others that may need improvement. 

Step by Step Process for Financial Planning

The Hudson step by step financial planning process is simple;

Step 1: Reach out to one of Hudson’s friendly and expert financial advisers by calling 1800 804 296 to book an initial meeting via telephone or zoom. Matt Paul is our Operations Manager and he will co-ordinate a time with you and at the same time send out a copy of our Financial Services Agreement (FSG).

Step 2: Our adviser will call or meet with you at the appointment time and this is where we will get to know you a little better, what matters most to you and what you are hoping to achieve. We can then confirm how we are able to hep you navigate your financial journey. It may be specific advice that you are after, regarding a situation like a redundancy or an inheritance, or it may be a short, medium or long-term holistic plan that you are looking for. Whatever the reason for reaching out to us, we will find the best way to help you in the appointment and will quote the appropriate fees.

Step 3: Once fees have been agreed upon, we will ask you to fill out a full personal financial profile. Your adviser will analyse the information and will make another time to talk you through different strategy options.

Step 4: A strategy will then be presented. This may be product specific or it may be a full financial plan.

Step 5: Once you are happy with the Strategy presented, it will be implemented, and we will confirm once everything is in place.

Step 6: We will then provide ongoing support to help you navigate through the financial complexities associated with each stage of life. Adapting to your changing needs is the key to long term success. As part of your initial agreement, we will have annual, biannual or quarterly reviews, but we are always here if you need to speak to us or if your circumstances change.

At Hudson we have an intimate knowledge and love of all things financial. This gives us the enthusiasm and desire to help you and we will go to great lengths to help you achieve your goals. We are committed to providing you with the best service possible to achieve a result that will set you up for the rest of your life.

FAQs for Financial Planning

How much does it cost to hire a financial adviser?

A financial adviser can put a plan together to help you meet your short, medium or long term goals or offer one-off expert guidance when you have important and potentially difficult decisions to make. We can offer an hourly rate if you just want to consult on one or two issues and are not in need of any ongoing advice.

The cost of a comprehensive plan ranges from $1500 up to $2500 for a simple plan, with only a few goals and objectives. A complex plan, involving trust structures, many assets and many goals and objectives would involve a fixed fee agreed upon before embarking on any plan.

Once your financial adviser ascertains exactly what you are hoping to achieve out of a financial plan, a fixed fee will be discussed with you before presenting your path ahead. If we then set up an ongoing relationship, the fee will range depending on the services required, whether you are with a Senior Adviser,  and your agreement with your adviser. Ongoing fees start from $550 per year.

What are the main benefits experienced from working with a financial adviser?

Financial Advice isn’t just for those with a lot of money, complex tax situations and offshore accounts. If you need help making the best financial choices for you and your family, paying for a professional could save you money, time and sleepless nights.

A Financial Adviser can help you to quantify the decision, understand the impact on other areas of your life and assess alternatives. A financial plan often helps with the decision making process.

A Financial Planner is there to help you make decisions with your money and to help you set and achieve personal goals. The financial world is becoming more complex to handle on your own and your Hudson Financial Adviser has spent years at university and doing post graduate study to offer expertise in financial matters that you may not have. It’s not just years of study, it’s the continuous study that they do and the years of experience working in the industry that make you adviser a valuable asset.

We have access to the top research houses and are often able to recommend products that would be harder to access without our help. Our regular contact with you ensures that you stay on the path that we set for you so that your goals and objectives are reached sooner.

What is the difference between an accountant and a financial planner?

A financial planner and an accountant are both crucial in planning for your financial future but they are both different professions. Financial planners help you make decisions with your money and can focus on single issues such as a redundancy payout, or can be more of a bigger picture of your lifetime wealth.

Accountants help in understanding structures, how taxes work, how to maximise your returns after tax, use of investment companies and trusts as well as providing advice around growing a business.

Tax plays such an important role in growing your wealth, that is why it is important that your adviser work directly with one of our specialist tax partners or team up with your chosen accountant to maximise your benefits and to work seamlessly towards your financial goals. Having the right tax structure is key to minimising your tax obligations as is knowing what you can and can’t claim. It is important to make sure that you’re getting the most out of tax time by ensuring that you’re claiming all the tax deductions you’re entitled to.

Unless your accountant has an AFSL (Australian Financial Services License), they cannot provide advice about financial products. Without an AFSL an accountant cannot advise a client to establish a SMSF, but they can administer it as long as the client has received separate independent advice  from a financial planner. A statement of advice mist be obtained from a qualified financial planner outlining the benefits of using a SMSF and from there your accountant can hep set up the fund. Building a team of experts can help you to break free from money worries.

A good accountant should take a holistic approach and work with your adviser to take into consideration your personal lifestyle objectives. 

Hudson work in collaboration with 2 very experienced accountants who are dedicated to working with your Hudson adviser to ensure that your financial plan takes into consideration every angle.

Can you help with Estate Planning?

Hudson advisers understand that your estate plan is one of the most valuable assets you can have. Knowing that you can protect your family and leave a legacy that secures their future is about more than money. Hudson work with 2 very experienced estate planners to ensure that no matter how much money you have, you are leaving a legacy, both a personal and financial one, for those you love. 

Contact Hudson for Expert Financial Advice today

Quality advice can help you establish a secure and comfortable future for you and your family. It will be based on your goals and objectives and puts you in control of your financial future.

Speak with our financial advisers on 1800 804 296 about this in more detail, or enquire online.

Is ongoing finance advice worth it?

Financial advice is for anyone who has financial goals or a specific financial circumstance, like a redundancy, and isn’t sure what is the best way to approach it.

There are many circumstances where financial advice may benefit you; buying a home, retirement, planning for your children’s future, a divorce, a new career, a marriage, inheritance, and many other life changing events. 

Getting the right financial advice can deliver more than just better investment outcomes, according to the Financial Services Council recently released research paper titles, THE FUTURE of ADVICE, prepared by actuary Rice Warner. The research estimates that those who obtain professional advice accumulate at least three times more assets after 15 years than those who make their own decisions. The younger the advice starts, the better the cumulative increase. Regardless of wealth level for an individual aged 40, about half the value of the advice is derived from simple guidance in respect to savings. But its not just better investment outcomes, it can result in an increased peace of mind, lower stress in relationships and even higher happiness levels.

Do you have the skills and experience to manage your finances, time to research financial products and are you prepared to take on the sole responsibility of making decisions that are likely to affect you and your family? If the answer is year, then you don’t need an adviser. 

But if the answer is no, financial advice is more than worth it.

If you’re not working with a financial adviser will you really do it yourself? It takes time, skill and effort. Finding time to research financial questions, evaluate your options and execute a decision takes time. Many investors are invested in just one target-date fund. Even if you could make the time, maybe there are other things youd rather do. 

Time is money and there’s a cost to delaying good financial decisions – and there a cost to prolonging poor ones like keeping too much in cash or putting off doing an estate plan.

Often what makes a financial adviser worth it is their ability to keep you on track and proactively identify financial risks and opportunities for you. We value experience in nearly every aspect if life, don’t discount it when it comes to managing your life savings. Our financial lives are complex and interrelated. Puling one lever can have unintended consequences in another aspect of your life.

Getting organised and building a strategy going forward is critical but then there is implementing the strategy, staying on track and revising plans when things change. Without ongoing support, recommendations sit idle and changes to your persona life keep coming. New legislation can require strategy changes, and things like losses could become a tax opportunity.

You need the tools, experience and objectivity a financial adviser brings to help you make the best decision the first time

Getting your finances in order, ensuring your family is cared for and getting a grasp on your path ahead can be empowering and liberating. Reducing or removing this source of anxiety can make working with a financial adviser worth it.