Print This Post
Email This Post
(No Ratings Yet)
Loading ...Financial Planning Factories - Money Tip without the Boring Stuff
October 31, 2008 by Josie Kay
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
It is a tough world out there. How do you find a financial planner that you can trust? First and foremost, we are not demigods (although I think I have met some that believe they are half human, half God).
It is not the first time you have heard me say that finance professionals cannot predict the future (obviously). It worries me no end that people (known as prospects to the financial planner) walk into extravagant financial planning offices and think to themselves ‘Wow, this guy must know what he is talking about!’ Look he is so successful!.
Intelligent investors know if anyone possessed the ability to consistently and accurately time the market, they would be instant billionaires. Why didn’t Warren Buffet, Bill Gates, anyone in the Top 500 Rich List walk into the same office? Oh that’s right.. I forgot they genuinely care about the little people. Codswallop! (not even sure if it is a word). If that is the case, why do they need to charge ridiculous fees? Why do they have to preach to the masses? Why do they need to advertise to get people to attend their seminars?
Their profits, and subsequent wealth is dependant on how much you invest with them (their retirement plan). They make money from commissions and fees. The more you borrow, the more they make. This is why I hate percentage fees as it provides too much of a carrot e.g. 3% contribution fee. Invest $100K = $3K, $500K = $15K. Does it take five times longer to implement your financial plan?
Potential clients hear the spiel, promoted as a ‘wealth creation’ seminar, which always starts with the emotionally draining stuff. If you have been to one, you will know what I am talking about. For example, if you don’t do something NOW, you will be living on the pension which is a miserable existence (eating dog food and sitting at home feeling sorry for yourself - tell that to my parents or my husband’s grandmother who is one of the happiest and proudest ladies I know, living on the single pension and socialising every day).
Throughout the whole 1-2 hour seminar they are chipping away at your emotions, so you feel under enormous pressure to do more for you and your family. Off you go … you decide to jump on their travelator (known as their gravy train) and end up borrowing large sums of money either against your home or taken out a margin loan (in many cases both).
I call them financial planning factories which is best described as a product flog – investment, loan and insurance. Similar to the investment property spruiker who collects high up front commission when he flogs you that over inflated investment property. Only difference is that the property spruiker makes all his money on the initial sale, whereas the financial planner can collect money from you year in year out (nice work if you can get it).
Financial planners are all different (because we are human). In my past life as a business development manager, I had the privilege to work with hundreds of financial planning business. Plenty do provide value for money and don’t charge an arm and a leg (perhaps their daggy office keeps costs down?).
Some even charge a flat fee, rather than a percentage of the amount invested. Most are educated on the concepts of risk and reward, investment time horizons, asset allocation, and portfolio rebalancing, as well as having the ability to analyse a few different strategies which are personalised and appropriate for YOUR needs and objectives e.g. are you better off paying the mortgage or perhaps salary sacrifice income to superannuation?
Do you qualify for first home savers account, co-contribution? Is your super fund the best place for your life insurance as it is cheaper and tax effective? Can you afford to put your house on the line? I can go on and on and on….
There you have it. I don’t like financial planning factories where they believe that ‘one size fits all’ (just like when I go shopping for a dress and want to wear size 8 and the shop assistant tells me it looks lovely). Unfortunately, these factories also give you the impression it is personalised advice.
Demigods don’t exist. Don’t forget to listen to that voice inside your head - you know - ’pehaps it is too good to be true’. This is very serious stuff!
If you have an experience you would like to share, please do not hesitate to contact me. I have a very sympathetic ear. Watch out. Everyone is after your money. Learn how to outstmart them!
Josie Kay
Sponsor - WineMakersChoice.com.au*
YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs. Josie does not ask for money. She relies on word of mouth, and would be chuffed and humbled if you told your friends, family, workmates, local media outlets to check out and subscribe to www.askjosiekay.com.au – free financial advice by a Certified Financial Planner. No strings attached! Don’t forget to enter your email to receive our weekly newsletter and great money saving tips.
.
Yes - one needs to be very careful when looking to hire a Financial Planner. First of all, find one with credentials so you know they have appropriate education and experience. Certified Financial Planners can be a great way to go. Also, Personality fit is often an over-looked factor. You want to make sure that you share the same basic philosophies with your planner. For example, if your planner is going to insist that you cut out your lattes each day, but you find them to be a $3 slice of heaven, you may not agree on larger issues either.