Is there any value in financial advice?

Andrew Zbik

Andrew Zbik

Getting good useful advice whether from a plumber or a planner or other expert is a cause of concern for many people.

I can’t help with plumbing but I have a list of strategies that I regularly recommend to clients that provide value for the service I provide and help our clients to grow real wealth.

  • Setting the right goals and objectives: I ask my clients a simple question – How much money do you need to enable you to choose if you want to work or not? Surprisingly, most clients cannot answer this when I first meet them. We create a plan that works out how much assets they need to put them in a position of “financial freedom” – where recurring income from assets covers their living and lifestyle expenses. Setting a clear vision on what this is and how short a client is of this objective provides great value in understanding what we need to do.
  • Accurate cash flow monitoring and budgeting: Most people do not track their spending or have a budget. We use a great program called MyProsperity that enables our clients to track their spending and then set a budget. Ultimately, it enables us to deliberately make a monthly contribution to an investment strategy. This varies between $200 to $5,000 for some of my clients Thus, this discipline achieves between $2,400 to $60,000 per annum to creating real wealth.
  • Restructuring non-deductible debt: I am surprised at how many financial advisers will only focus on managing assets (e.g. superannuation) and have no plan to help a client reduce non-deductible debt on their home. Working closely with a mortgage broker can potentially achieve significant savings on interest repayments by restructuring loans and lenders. The use of additional loan products such as offset accounts can help to create more free cash flow by saving on interest costs. This free cash flow can then be used towards an investment strategy to build real wealth. For many of our clients we achieve an outcome where they are able to do purchase more assets for building wealth without possibly needing to give up cash flow to fund their lifestyle. There is great value in that.
  • Using superannuation wisely: Australians are very fortunate to benefit from our superannuation regime. However, for most Australians their superannuation will not be enough to achieve the financial outcomes they desire. A good plan will consider if an industry superannuation fund or a self-managed superannuation fund is most appropriate to facilitate the creation of wealth for retirement. For many of my clients this may include deciding if it is appropriate to combine all their superannuation into a self-managed superannuation fund and purchase an investment property. Alternatively, an industry fund may be appropriate for the sum of money to invest and may be very competitive for fees. This gets more capital working and growing over the long-term in a concessionally taxed environment.
  • Getting the asset mix right: A good investment plan will cover the purchase of property, shares, some fixed income securities and a healthy cash reserve. Proper and thorough research will facilitate the purchase of quality investment assets that will maintain their value and cash flow throughout the full economic cycle (the time between a recession and a booming economy). Appropriate gearing for investment assets can help to get more capital working for you which creates a compounding effect when growing real wealth. A good strategic plan will be able to. Maximising superannuation contributions to save tax may not be the most appropriate strategy for everyone. If you still have non-deductible debt on your home, you may be better off paying the higher rate of tax on your income and reducing your home debt. This strategy may save more money on reduced home loan repayments than on the tax saved by maxing additional superannuation contributions.

In summary, a good financial strategy will easily be able to demonstrate benefits such as tax savings, cash flow improvements and projected increase in real wealth through the purchase of investment assets. The cost of paying for that financial plan should be a small price to pay for the benefits of implementing that financial plan.

By Andrew Zbik, Senior Financial Planner

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