If you don’t have much money and your questions are simple, then you should first look to the free resources on Google.
But what is simple? Budgeting, Investments, Tax, Life Planning and Insurance can all have a “simple” side to it, but what do you need?
Taking the above example, Budgeting may be simple but maybe you won’t save unless someone checks in with you monthly or quarterly. For this you might be paying for the hour or package it up into a yearly deal.
Investments may be simple if you buy a trusted index ETF and don’t need to make withdrawals but maybe you are seeking education about other options that may provide better returns or results more suited to you.
Tax may be simple but maybe you don’t want to spend the time to research all the tax strategies and would rather pay someone to talk about the relevant ones for you and put them in the right order so you don’t make a mistake that could cost you.
Life planning might be simple but perhaps it is better to see the financial impact of Choice A vs B on your Cashflow and Savings in number form projected throughout the years, adjusted for every relevant detail you wish to adjust.
Insurance might be as simple as calling up your Insurer or Super fund, but do you know the fine print that excludes paying you on your pre-existing health conditions? Have you considered costs versus other insurers and which options to take are good value or not?
It helps with Goals. If you know you what you want then this would be easier to answer. If you don’t then perhaps having a chat might still help you establish some goals.
Is a Statement of Advice needed? Legally, financial advisers must produce a long document of writing akin to a small book, justifying their recommendation. This applies to most products and tax strategies. They may charge you a fee upfront or ongoing to recoup the cost of time and expertise. This cost can vary from hundreds to thousands. For the cashflow poor, it can be charged through superannuation.
Is insurance charged differently? Generally, yes, because the insurance premium you pay to the insurance company will partly pay commissions to the financial adviser or insurance broker. If the insurance premium is very low, you might be asked to pay extra fees in another way.
How much is too much? First, I would suggest to be mathematical about it. Divide the fees by the benefit. Then try to figure out if any intangible good stuff comes from that adviser relationship that you are willing to pay for eg time saving, accountability, mental health, peace of mind of having a sounding board etc.
Investments: Say you want to get the best returns for your preferences, then you would want to know the net returns after fees. The net returns should be publicly available and the financial adviser should be able to give you an indication of fees at all levels. Divide one by the other and you’ll have a clearer idea of how long it takes to recoup those fees. However, if you want more than just returns (say someone to talk to and educate you on your options) then perhaps paying the extra might make sense for you. In comparing fees, it needs to be fair, but that also requires a level of education/information. Not all investments are the same so should be compared to its similar rival. You will probably end up having a mixture of investments that are different to everyone else.
Tax: If a financial adviser says they can save you 50k in tax through a superannuation contribution strategy and charge you 2k then that’s very different to one who says they can save you 3k in tax but charge you 2k. If you are budget conscious then you might want to do some self-research and chat to your accountant. Or you might pay an hourly rate to a financial adviser to explain tax concepts and options to you, and the associated penalties of getting it wrong so you can decide for yourself what to do.
Life Planning: If you wanted to see the financial projections of changing jobs, buying that second property, starting a business, having kids or retiring early, taking into account all things tax, cashflow, rates of return, detailed expenses, then you might be able to get away with an hourly rate.
Hourly rate: From reading the financial services guides of several financial planning firms, they generally range up to $330 per hour. Some may not charge you at all for the initial consultation but given the right fit might propose a certain fee structure for you.
How to go about it: I would say do a quick bit of research on what you want. Call up a few advisers and say what you’re after and ask how much it might cost. Then find out about what they do and how they do it.
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