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Financial Plan Checklist – What To Check In Your Financial Plan

By on February 14, 2012 in Checklists

Financial Plan Checklist - One PageHow do you know if a financial planner has a created a good financial plan, just for you?

There has been a great deal of media discussion here in Australia concerning the difficulties in obtaining a good financial plan from a financial planner. However, finding a simple definition of just exactly what a good financial plan looks like is difficult.

A financial plan can be described as a road map that has been drafted to help you arrive at a pre-determined financial destination, in the best possible shape.  However, as soon you set out on your financial journey, things will change. Responsibilities for children and mortgages will sway; you’ll fall into the occasional financial pot hole (sickness, loss of job etc).  Tax and investment legislation will change and the investment markets will fluctuate with the economy.

Your financial plan will need to be tweaked, updated and even replaced completely with a new financial plan several times during your lifetime. And each time your receive a financial plan, you’ll want to know, ‘Is this financial plan right for me?’

Our checklist is designed to help you assess the basics of what a good financial plan should include:

1.    Has the financial planner listened?

You want a personalised financial plan, not something that is re-hashed and sold to everyone that walks through the door.

Look to make sure that the financial planner has identified and clearly articulated your core financial goals. For example, they should include the short term goals that might include a new car and a holiday. Your medium term goals that could include a new house and your long term goals for retirement.

Check to make sure the financial plan has captured your true financial situation. Al investments, liabilities, income and expenses need to be accurate.

2.    The scope of the advice

If you asked for a full financial plan, your financial planner should identify areas beyond your investments. They should take into consideration your estate planning, insurance, your health, business assets and any specific concerns you may have for the future.

All good financial plans will provide you a statement detailing the ‘scope’ of the advice. This statement should clearly articulate what aspects of your financial situation that the financial planner is advising on and what elements they are not.  For example, the financial planner may highlight in the scope statement that they are only advising on your investment portfolio. 

3.   Why and How

Throughout the financial plan, the financial planner should clearly articulate why each recommendation was considered and how the recommendations will help you to achieve your financial goals.

4.    Investment Risk

You will need to fully understand and be comfortable (sleep at night) with the risks that are associated with your financial plan. The financial plan should explain why, the level of risk has been recommended and how this investment risk will help you to achieve your goals. This is vital as when things go wrong, people often say that they were not aware of the risks associated with their investment. Don’t let this happen to you.

5.    Product Risk

Are you aware of the products and the companies associated with the recommended investments and insurance?  You want to be confident that the product providers will stand the test of time. If you are not sure, do your own research. Again, you’ll need to know why each product was recommended and how it will help you to achieve your goals.

6.    Is the financial plan realistic?

We have all heard the saying ‘If it sounds too good to be true, it normally is’. A good financial plan is unfortunately quite boring. A plan with extravagant claims to easy wealth accumulation is something you should avoid.

7.    Fees and level of service   

The fee section should be very transparent. You should be able to identify the fees for:

  • Developing the financial plan
  • Implementing the recommendations
  • The fees associated with on-going services (product and advice fees).

The on-going service fees are the most important as over a long period of time, these fees will chip away at you investment returns. You need to fully understand what level of service you’ll receive in return for paying the fees.

At the start of this article we highlighted that arrangements for advice should go on for a lifetime. You need to know how the financial planner’s business will manage your financial well-being for now and in the future. You don’t want nasty ‘fee’ surprises when your situation changes.

8.    Who can you complain to if you are not satisfied?

If it all goes wrong, you will need to know how to lodge a complaint and to whom.  All good financial plans should provide you with information and contact details of where you can lodge a complaint if you are not satisfied with the outcomes from the financial plan. This will include company details of where to lodge a complaint, along with contact details for government regulatory bodies that regulate financial planners.

Summary

A good financial plan can be a great asset for securing your financial future. You need to play your part in the process for developing and monitoring the financial plan by being open and honest with your financial planner.

If you are not sure of anything, always ask ‘why and how’ questions.  Don’t be afraid to complain and always keep yourself updated.

We have summarised the key points into a one page ‘Financial Plan Checklist’ to make is easier to assess your financial plans.

Download – Free Financial Plan Checklist


Recommended Reading – Financial Planner Checklist – 8 Questions You Must Ask. A guide to find a financial planner for you and it also includes a one page checklist.

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Credit Cards – When It’s Safe To Use Them Checklist

By on January 31, 2012 in Checklists, Credit Cards, Debt

A Checklist to make you think before buying on Credit CardsAfter catching up with friends over the weekend, I was given a task to help them from over spending on their credit cards. Like many people, they find themselves struggling to control their credit card debt.

I raised the obvious question, ‘If your credit cards are giving you so much trouble why not cut them up?  ‘No way’ I was told. ‘These days you must have credit cards; it’s just the way of the world.  We just need to be reminded to be careful before using them. A warning of some description would be a great start’.

At first, I struggled to take them seriously, but after a while it made some sense. We are quite used to warning signs to remind us about things that may seem obvious to many, such as: put your seat belt on, hot coffee can burn and gambling can cause significant financial losses. So why not have a warning for your credit cards.

With that simple brief, the humble savers team came up with two Credit Cards – When It’s Safe To Use Them Checklists

Each list is the size of a credit card so it can sit comfortably right next to your credit cards in your wallet or purse. You can use both suggested checklists or carry the one that you’ll think will work for you.

Most people who really suffer over spending on their credit cards tend to be impulsive spenders. Each checklist is designed to make you stop and think that little bit more before putting that purchase down on your credit card and having to pay back the debt, plus interest, down the track.

To download the credit card checklist, simply click on the Blue link below. Upon downloading the PDF document, simply cut out the Checklist(s) that appeals to you.

Credit Cards – When It’s Safe To Use Them. 2 Checklists

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Financial Planner Checklist – 8 Questions You Must Ask

By on January 10, 2012 in Checklists, Featured

Seven Questions for your financial planner and one for youSeven vital questions to ask a financial planner and one big question for you

How do you find a financial planner that is just right for you? There is little doubt that most people can benefit from the services of a good financial planner (financial advisor).  These eight questions act as a great checklist. They have been designed to extract more information from the financial planner to help you make a better decision when seeking a financial planner. 

To print a  Free One Page Financial Planner Checklist click the Download Bar 

Financial Planner Checklist – 8 Questions You Should Ask

 

The seven questions for a financial planner

1.    What are the financial planner’s qualifications and experience?

All Australian financial planners need to be suitably qualified to provide personal financial planning advice.  They should readily provide their qualifications upon request. He/she will also need to have an Authorised Representative Number and this can be checked against the Australian Securities and Investments Commission (ASIC) website to confirm that they are properly authorised.

They should also give you a Financial Services Guide (FSG) and this will also provide further information about the financial planner and the company that they work for.

Currently there aren’t many qualifications required to be registered as an authorised financial planner. Therefore, to get a real sense to their standard of education you can also ask:

  • Do you have a finance degree?
  • What did you study last at college/university?
  • What training and studies do you currently undertake?

Qualifications are one thing, but you also want to know about their experience. Key questions include:

  • Describe your typical client?
  • How long have you been working as a financial planner?
  • What have you learned most since becoming a financial planner?
  • If a summary of your skills, values and financial planning beliefs were to appear in tomorrow’s business pages, what would be written?

These questions are simple conversation starters.  However, they  play a pivotal role in establishing a real sense of  who they are and what they do as a financial planner.

2.    What is the structure of the company employing the financial planner?

Most Australian financial planners work for small companies that are operated by the senior financial planner. You’ll want to know if the financial planning company is capable of managing your affairs both for now and in the long term. Key questions to ask:

  • How long has the company been in operation?
  • Does it have any outstanding issues such as unresolved client complaints?
  • How long has the core staff been at the company?
  • What will happen when the current company owner(s) exit the business e.g. at retirement?
  • Is the business linked to a major institution and if so, does this create any conflicts?

Investing for the long term may well be investing beyond the working life of the financial planner. You need to be confident that you will be taken care of when things inevitably change. If the company is linked to a major institution, you need to consider if this will create bias in the advice from the financial planner. However, for many investors being linked to a major institution does provide some level of security.

3.    What are the benefits for the financial planner by working at this company?

Simply ask – What are the benefits for a financial planner working at this company?

They should be able to articulate their answer quite easily. In their answer, you are looking for benefits that find their way back to you as the client. For example, if they say ‘The company provides great facilities and support that allows me the freedom to focus on the client’, that is a good start.

If they are struggling and just rambling on, this would obviously not be a good sign! Worse still, if they say ‘That the company pays the best bonuses in town’, it’s time to move on to the next financial planner.

4.    What are the disadvantages for the financial planner by working at this company?

Simply ask: What are the disadvantages of working at this company?

Now this is a tough one for the financial planner. Everyone finds it easy to talk about the good but we all know there must be some bad! You are looking for honesty in their answer. If they are honest they will highlight a couple of things such as a restricted range of investments, lack of on-line presence etc.

If they say ‘The business is too strict on its auditing and compliance’, this should start ringing the warning bells. A good financial planner should not be afraid of good compliance procedures and ultimately good compliance is there to protect you as the client.

5.    What client experience will be delivered?

Now we’re getting to the nitty gritty. This is why you are sitting in front of this financial planner. You want to know the WIIFM factor (What’s In It For Me).  After all you are the one paying the fees and you want a return for your investment in this financial planner.

Just ask: What is the client experience delivered by you and the company?

If the financial planner replies ‘It is all about the exceptional investment returns that I get for my clients’, it could be a good time to leave the office.  A financial planner selling future returns is normally selling false hope for all concerned.

You want the financial planner to highlight that the experience delivered is ’all about caring for you as their client’. They will be there to help, assist, facilitate, guide and carefully invest your investment funds. You also want them to act like a good general practitioner (the local doctor), by engaging specialists to assist with all aspects of your finances.

A financial planner that really cares for you will be more cautious and understanding of your situation. They will take responsibility for their actions and work in your best interests. These financial planners are out there, you just have to work a bit to find the one for you.

6.    What fees will be charged for the services provided?

You need to know the fees no matter how much they may care for you.

Ask: Can you give me a schedule of fees for the services that you will provide?

Financial planners should have this schedule.  The financial planner should also be able to provide the scope of their advice (what they are/are not advising on).

It is important to understand that fees tied to your investment account can eat into your investment returns and of course, you won’t get quality advice and service for free either. Your goal is to fully understand the fees and what you get in return for these fees. This way you can compare financial planners and make an informed decision as to which one is suitable for you.

7.    What if something goes wrong?

You need to ask: If something goes wrong and I need to complain, how do I do that?

This information should be in the FSG (see question 1). However, you can also ask these follow up questions:

  • What have been the company’s experience for complaints over the past couple of years?
  • Have there been any long running complaints and if so why?

You should be getting a flavour of what really happened with the client complaints. The financial planner should be able to highlight a fair process that has been followed for all complaints. If they stumble on their response, treat it as a warning. 

 

1.   The big question for you – Can I work with this financial planner?

The emphasis of this question for you, is to determine if the financial planner is the right fit for you and, are you the right fit for the financial planner. You should see your relationship as a two way arrangement. You will need to be very open and honest with the financial planner to enable the financial planner to deliver the best advice and service.

They don’t need to be your best friend. An error many people make when seeking a financial planner is to select the ‘friendliest’ financial planner that they meet, without judging the financial planner’s ability to deliver the right service.

While you don’t have to like the person, you do need to be able to trust them. Like all good relationships in life, trust will be critical for the relationship to be a success.

If you follow the questions, take notes and consider a number of financial planners, you will be in a much better position to choose one with confidence.

You can easily print this article by clicking the Print – PDF button below and it will go hand in hand with the Financial Planner Checklist.

Now that you are set yo see a Financial Planner, make sure you get the financial plan your deserve: See also Financial Plan Checklist – What To Check In Your Financial Plan

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