Financial planning is a step in the right direction: here's how the process works

Money and Life
(Financial Planning Association of Australia)

Nearly half of all Aussies plan on seeking financial advice in the future1. If you're one of them, you might be wondering how it all works. Here's our comprehensive guide to the financial planning process.

If you've never worked with a financial planner before, it can all feel a bit daunting. How do I find a financial planner? How much will it cost? What then?

The good news is, it's a relatively simple and easy process. There are lots of resources available to help you, and you'll have plenty of opportunities along the way to evaluate both the planner and the advice you're receiving, so you're not locked into anything you're not comfortable with.

Why do I need a financial planner?

There are many reasons why people seek advice from a financial planner. In general, the main triggers are marriage, having kids and planning for your family's future or other life events such as changing jobs. Perhaps you're concerned about your retirement and need to understand what the next stage of life could look like whilst we're experiencing this global pandemic. None of us know how long the COVID-19 outbreak will affect us and what the long term consequences are, so it may be worth checking in with a financial planner to safeguard yourself and your assets as best as you can.

Whatever the reason, if you've been thinking about getting financial advice, now is a great time. It's never too early to start planning for your financial future.

What is the financial planning process?

1. Preparing to see a financial planner

Consider your needs

Before you meet with any planners, it's a good idea to think about what you want help with. Do you want help investing money? Budgeting? Or planning for retirement? Knowing what you need help with will help you find the right financial planner for your circumstances, as planners can have different areas of expertise.

Understanding the types of advice

There are two types of financial advice available to consumers. General financial advice doesn't take into account your personal circumstances, while personal financial advice is tailored to your individual situation and goals. A financial planner can give you tailored personal financial advice about a single issue, such as superannuation, or ongoing advice, including regular monitoring and review of your financial affairs. Read more about the difference between general and personal financial advice here.

2. Choosing a financial planner

What should I look for in a financial planner?

When choosing a financial planner, you want to make sure that they have the right qualifications and experience. Members of the Financial Planning Association of Australia (FPA) also adhere to higher standards than non-FPA members, including a strict code of professional practice and code of ethics. You can find out more here.

Tip: Financial planning is an ongoing relationship, not just a one-off meeting. Look for someone that you're comfortable with and can work with over the long-term.

Meet and compare financial advisors

Once you've shortlisted your top two or three planners, it's time to meet with them!

Most financial planners won't charge you for an initial meeting, so this is a good opportunity to meet with a few different advisors and see if you find a good match.

Ask plenty of questions and don't be afraid to ask about anything you're unsure of. A good planner will listen carefully, answer your questions clearly and explain what kind of advice they can offer you.

They'll also ask about your current circumstances and what you're hoping to achieve financially (your financial goals).

This is also your chance to ask about their fees, if you have any questions.

Tip: Remember, you can go away and think about it, you don't need to commit to anything at the first meeting.

What does it cost to get financial advice?

There are a few different ways planners can structure their fees. The cost depends on the complexity of your situation, as well as the method the planner uses. The fees might include an upfront fee to identify your needs, develop a financial plan and implement their recommendations. There may also be ongoing administration and/or services fees.

Ask the financial planner how they charge for their services at your first meeting. Make sure you're comfortable with their fees before you agreed to receive any services from them, or sign any documents. Find out more about fees here.

3. Getting financial advice

Preparing the financial plan (also known as Statement of Advice)

Once you've agreed to go ahead, your financial planner will request more detailed information from you, so they can prepare your statement of advice. This usually includes information about your income, assets, debts, expenses, insurance, wills, superannuation etc. It also sets out their advice, details of the financial product provider and information on payments to the financial planner.

Once your statement of advice has been finalised, it will be presented to you in a follow-up meeting. Take the time to go through your plan carefully and make sure you understand it all. Check that it meets your financial goals and that you're comfortable with the level of risk.

There is no pressure for you to accept the recommendations in your Statement of Advice. If you're not comfortable with the plan, discuss your concerns with your planner.

Once you're happy to go ahead with the SOA, the financial planner will usually ask you to sign a service agreement, or authority to proceed document.

Implementing the recommendations

Once you're ready to go ahead, your financial planner will help put your plan into action. That could mean setting up investments, choosing insurance/s or working with your accountant and/or lawyer.

Reviewing the plan

It's important to review your financial plan regularly, to make sure it still meets your needs. If you're paying for ongoing financial advice, your planner should meet with you each year to review your financial situation, discuss the progress of your plan and advise you of any legal or regulatory changes that could affect you.

4. Ending financial advice

If for any reason you're not happy with your financial planner, or the advice you're receiving, you do have options. Check your Statement of Advice for details on ending the relationship, or contact the FPA for advice.

There you have it! Now that you understand how the financial planning process works, there's never been a better time to get started.

We've included lots of useful information and resources on Money & Life to help you in your financial planning journey, so take a look around and then try Match My Planner!

ASIC, 2019, Financial advice: What consumers really think