Everyone has financial goals, whether they call them that or not.
Some people want to save for a new home or their children’s university education. Others want to set money aside for an early retirement, or plan ahead to be sure they have the resources to be comfortable once they retire.
The best way to do that is to use a financial adviser to help you set those goals and then determine how to achieve them.
But that raises the question: why pay a financial adviser when I can do it myself?
Is it worth it?
Here are 5 ways a financial adviser can save you money.
1. Building a Do-Able Plan
It all starts with making a plan. That sounds straightforward, but it isn’t easy to do on your own.
Let’s look at an example.
If you have debt, it may seem unreasonable for you to even think about putting money away before the debt is paid off. Without an adviser, you would simply continue to make debt payments and have nothing saved for the future. Or, you may take on more debt, costing you even more money.
A good financial adviser will work with you to establish goals, and then examine your current income and expenses to determine what you can put aside for savings while still paying down your debt. Once the debt is removed, the plan can be re-examined and updated.
An adviser can also help you look at re-financing your debt, or save money in taxes.
In the end, you will save money by having an expert determine where to best put your resources to maximize gains.
It’s all part of a comprehensive plan.
2. Providing More Than Financial Advice
The best financial advisers will discuss your entire financial picture and build more than investments into your comprehensive plan. Financial planning is about more than putting money into the stock market.
It’s true that your adviser should discuss your investment portfolio.
But they should also save you money by providing many services under the one roof and working with you on the following (where relevant):
- Retirement strategies
- Superannuation advice
- Debt management
- Personal insurance
- Insurance claims
- Pensions
- Tax efficiency
- Specific advice for small and medium businesses
- Business succession planning
This eliminates the need to have different aspects of your portfolio managed by different people, trying to manage them on your own, or not even understanding what’s possible for you and your finances.
Here’s a specific example how advice in areas beyond putting resources into investments will save you money.
In the case of tax advice, a financial adviser can save you money by:
- Positioning your investments to take advantage of tax laws;
- Reviewing your returns to look for savings in the future; and,
- Suggesting alternatives to lower taxes during retirement.
In the case of Education Savings Plans or Investment Bonds, a financial adviser can save you money by:
- Placing your money in an investment bond or tax paid bond, in which the investment provider pays the tax on the investment earnings for 10 years, so you don’t have to report the earnings in your tax return;
- Placing your money in an offset account attached to your home loan, so you don’t pay the interest on the offset account; or
- Setting up a family trust that allows you to distribute investment income to family members that will allow you to take advantage of lower tax rates.
In each of these cases, it’s best to seek the advice of a financial adviser, as there are several implications to these education savings ideas.
But in the end, the savings in either example wouldn’t be achieved if you weren’t working with a financial adviser.
3. Knowing What To Invest In and When to Invest
If you’re managing your own finances, it’s difficult to stay on top of the best investments, as well as know when to buy, and when to sell. Most importantly, it’s important for you to know what your risk appetite is. The risk that allows you to sleep comfortably at night informs your adviser on how to truly tailor your investment plan.
A financial adviser has an advantage compared to the knowledge and abilities of most people managing their own investments. When choosing a financial adviser, be sure you know they are licensed to operate in your jurisdiction. In Australia, for instance, certified advisers operate under the AFA (Australian Financial Adviser).
Compared to you, a financial adviser has the advantage of their knowledge, education, experience and certification. They understand proper diversification of investments and risk management.
They are usually part of an organization that also brings the advantage of a financial framework to managing your finances.
In this regard, you’re saving money because advisers have the tools and resources to help you get more appropriate returns than you could on your own.
4. Doing Income Planning
It’s one thing to have investments that are making money for retirement savings, for instance. But there needs to be a plan for distribution of that income.
For instance, if you don’t understand how much you need for retirement on an annual basis, you could end up short of resources. If you don’t properly “pay yourself,” you could end up losing too much money paying taxes.
There needs to be a strategy for saving money, understanding necessary cash flow, and withdrawing the money when necessary. Investment planning includes many pieces, and isn’t just about putting savings in the bank.
A financial adviser will save you money by helping you figure out how much you will need when you retire, how to achieve those goals, and when it’s appropriate to withdraw money.
5. Removing Stress
Let’s face it. Managing your own finances from the side of your desk isn’t easy, particularly with full time work, or running a business, or family and other pressures as part of your day.
There is a price to that stress, particularly if your investments aren’t doing as well as they could.
It’s almost impossible to stay on top of investment trends, the markets, and many other factors that influence your investments.
Choosing a good financial adviser, who does this work on a full time basis, will relieve that stress. You can focus on understanding what the adviser is doing for you, monitoring your portfolio updates, and appreciating the performance of your investments.
You will save money by using an adviser who knows a lot more than you about the markets, taxes, risk assessment, and much more.
Final Thoughts
Building a financial plan at any stage of your life is one of the most important things you can do for yourself, your family and your future.
While you may think you can save money by handling your financial planning and investing on your own, you could end up costing yourself extra money in the end. You could lose money, or you may “leave money on the table” that you didn’t even know you could earn.
To talk to one of Financial Framework’s expert advisers, visit our contact page or give us a call today.
