Financial planning FAQs
Financial planning is about developing strategies to help you achieve your goals in life. It can help you make the most of your money, take control of your finances, avoid costly mistakes, protect your assets, set you up for a comfortable retirement and achieve your financial ambitions.
An adviser helps you create a financially secure and comfortable future for you and your family. They will look at your short, medium and long-term goals, and develop a personalised plan to help you achieve them.
You don’t have to be in financial strife to see an adviser. Similarly, you don't’ need to be asset rich in order to warrant seeing an adviser. If you’re looking for professional advice on how to make your money work better for you, then you can and should see an adviser - regardless of how old or asset rich you are.
A adviser can be helpful if you are:
- Nearing retirement
- Planning a family
- Earning a high income
- Needing specialised financial advice
- Have recently bought property
- Own assets that you would like protected
No, your financial adviser can work with your current level of savings and earning capacity.
At your first meeting, you and your adviser will discuss your current financial situation and your various goals and needs.
In light of this, they will be able to establish the scope of the advice and give you an idea of the cost.
At Mortgage Choice, we have a clear and transparent pricing structure that your adviser will walk you through. This ensures you know exactly what you are getting for your money.
In addition to establishing the scope of advice, your adviser will work with you to help identify the most suitable strategy to achieve your financial goals.
Your first meeting will be free and there are no obligations to follow through if you do not wish to.
Depending on what services your financial adviser provides, they will either receive a commission or receive an upfront advice fee.
The right financial adviser will be qualified, meeting the Australian Securities and Investment Commission’s minimum and ongoing training standards as set out in the Regulatory Guide 146 Licensing: Training of financial product advisers.
In addition, your adviser should either hold their own Australian Financial Services Licence or be an authorised representative of a licensee.
When trying to find the right adviser, it is important that you meet face-to-face and ask them tough questions, including:
- How do you get paid?
- How much do you get paid?
- What is the worst that can happen to me?
- What experience do you have?
- What is your regular clientele?
There are a range of question you should ask your adviser. These include but are not limited to:
- What are your qualifications?
- What is your representative number?
- Who are your typical clientele?
- What is your experience as an adviser?
- What can I expect from you?
- How can you ensure the protection of my assets?
- How are you paid?
- What is your fee structure and is it negotiable?
- Is my first consultation free?
- Do you earn more by recommending a particular product over another?
Your adviser will be able to evaluate your progress and provide feedback on how you are tracking in accordance with your financial goals.
In the initial stages, you may need to see an adviser regularly as they work with you to achieve your financial goals. After a period of time and discussion with your adviser, you may only need to see them once every so often for a check up.
After the first meeting, your adviser will develop strategies and recommendations based on your needs. You will receive these in writing at your next meeting where the adviser will explain these recommendations in greater detail. You will also discuss when your subsequent consultations should be held and what they will include if you wish to proceed.
Cashflow management FAQs
Cash flow management is the process of tracking of your incomings and outgoings. It allows you to predict how much money is available in the future and how much money you will need to cover costs.
A financial adviser can identify areas in your cash flow where you can potentially save on costs, reduce debt, and maximise your income.
There is no hard and fast rule on how much you should have in an ‘emergency fund’. The important thing is that you start setting money aside for it. It can just be a small amount of your income each month, because at the end of the day, every bit counts.
There are a variety of different ways to save for multiple goals.
You may find it helpful to create a list of your goals and put them in order of priority so short-term goals at the top and longer-term goals at the bottom. This will keep you focused.
Another strategy is to open savings accounts that align with your specific goals, and set up automatic transfers to each one.
Alternatively, you may just want to work on one goal at a time and make your way down your list.
The best method is the one that helps you save diligently so that you can reach your various goals.
Everyone’s financial situation is unique and there are various factors that can determine whether you’re on track. A financial adviser can assess your ability to reach your goals and provide guidance as to how you may be able to get your money on track.
Diversification means divesting across a range of asset classes. It is important as it can ensure consistent returns over time and while it will not guarantee against loss, it can help minimise risk.
No, they will advise you about a range of assets that you can invest in.
Your financial adviser will look at your financial needs and goals then work out an investment strategy to help you achieve those goals and needs.
The risks associated with investing include the asset class losing value, uncertainty about the market, and potential financial loss.
Risk vs Return trade off is the principle that the higher return your investment boasts, the more risk there is. On the flipside, low levels of risk means a potentially lower return. It is important to understand the different levels of risk and the reward they may bring as it will influence the decisions you make with your investment portfolio.
You can legally access your super when you reach your ‘preservation age’ which is the minimum age until which your super must be preserved. This is usually between 55 and 60 - depending on when you were born. Once you reach that age, you can access your super as long as you are permanently retired. Alternatively, you can access your super after the age of 65.
If you are a PAYG employee, the minimum super your employer must pay each quarter is called the super guarantee (SG).
Currently the SG is 9.5% of your ordinary time earnings (OTE).
OTE is usually the amount you earn for your ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.
If you would like to contribute more money to your super, you can enter into a salary sacrifice arrangement with your employer.
If you were to enter into a salary sacrifice arrangement with your employer, you agree to have some of your salary or wages paid into your super fund instead of to you. These contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.
It is important to note that there are caps on the amount you can contribute to your super each financial year if you want to avoid being taxed at higher rates.
More than $25,000 a year in concessional contributions will attract a higher tax rate.
Your financial adviser will be able to show you whether overpaying your mortgage versus making additional contributions to your super fund will be beneficial to your bottom line. At the end of the day, it all comes down to your unique financial situation, age, income and broad financial goals. If you would like to know whether you should overpay on your mortgage or make additional contributions to your super fund, speak to your adviser today.
Self-managed super funds (SMSF) are a great way to take charge of your superannuation and plan for your retirement. It is important to note that all self-managed super funds need to be run by you. You will also be responsible for any investment decisions and ensuring you’re complying with super and tax legislation.
There is no set figure required to start an SMSF but it is recommended that you talk to your adviser.
There is no hard and fast rule as it depends on your unique financial situation, goals and needs. The best thing you can do is speak to an adviser if you are considering an SMSF.
If you are over 18 and earning more than $450 each calendar month, your employer is required by law to make super contributions on your behalf. If you are under 18 and work more than 30 hours a week, your employer should also be making super contributions.
You can check that you are being paid super by looking at your payslips and super account records.
It is a good idea to consolidate super accounts if you have more than one so you only have to pay one set of fees. You can also ask the ATO or your super fund to look for missing super contributions.
As a general guide, there are a number of key elements to look for:
- Your account balance
- Contributions from your employer
- Fees including administration, management and contribution fees
- Insurance cover
- Personal details and tax file number
This will depend on your circumstances so you should seek the advice of your financial adviser in evaluating whether you should have insurance cover.
Super is the way that Australians save for retirement and it is important as it is the savings that you will use when you leave the workforce.
Yes. Your financial adviser can provide advice on what you can do when it comes to your super and how it is invested. Most super funds let you choose between different investment strategies or options.
Look at the product disclosure statement (PDS) for your fund to find out how each strategy or option works. From there, you may wish to change your investment strategy depending on your age and your openness to risk.
Switching is easy. You just need to fill out a rollover form and send it to your new fund. Your financial adviser can also help you consolidate your super and look for any lost super you may have from previous jobs.
In order to switch to another super fund, you will need proof of identity. If you do choose to switch funds, you should make sure you inform your employer so they can make contributions to it.
You can search and retrieve any lost super by contacting your local financial adviser, or by logging onto the MyGov website.
Estate planning FAQs
A will is important as it clearly outlines who receives your assets and how they should be distributed in the event of your death.
No, a will only covers the assets that you solely own. This excludes jointly-owned assets such as property, assets in a family trust, and superannuation.
An executor can be anyone over the age of 18. Some may appoint their spouse, parents or a close relative as their executor, while others may opt for a third party such as a trustee or a lawyer.
We recommend you review your will whenever there is a major change in your life or circumstances, such as getting married, having a child, getting divorced, or in the event that you acquire additional assets.
An Enduring Power of Attorney is someone who makes financial and personal decisions on your behalf should you be unable to do so.
In your will, you can nominate someone to be a testamentary guardian of your children and they will be able to make decisions about their long-term care. A child does not necessarily have to live with that guardian, but rather the guardian will ensure they are cared for if the child’s parents are deceased and there is no legal order in place stipulating who the child should live with. If one of the child’s parents are alive, a testamentary guardian shares the responsibilities with the surviving parent or other guardian.
A testamentary trust is a trust created by a will to provide a greater level of control and flexibility of your assets to beneficiaries. These also protect your assets and reduce the tax paid by beneficiaries from the income earned from the inheritance.
Estate planning is not just for the wealthy as everyone, regardless of their wealth, should make sure they have planned for the future and ensured there are safeguards should the worst happen.
Estate planning is important for all ages. No one can predict what may happen in the future and estate planning ensures what you want done is carried out in the event you are not around.
Considerations will vary depending on your unique set of circumstances and life stages, so it is best to speak to a financial adviser. They can suggest the factors that you need to take into consideration. Check out our lifestages tool here.