Christina Economic n Finance

What is fee for service financial planning?

Fee for service financial planning is where a client pays their financial adviser a fixed fee for the services and advice they provide.  Much like you would pay your mechanic to service your car.

Currently in Australia there are two main ways that financial planners are paid Commissions and Fee for Service:

Commissions – this is the most common form of remuneration for financial planners in Australia.  It is where product providers or financial institutions pay financial advisers a commission when their client invests or purchases their product or investment.  There are generally two types of commission that are paid:
- Upfront commissions which is a larger lump sum amount paid to the financial adviser when the product or investment is first set up.  This lump sum amount varies depending upon the arrangement with the provider but is generally around 4%
- Trail commissions which is a smaller ongoing commission which is paid to the financial planner usually on a monthly basis for the life of the investment or as long as the client retains the product or advises the provider that they have transferred to another financial planner.  The average trail commission is around 0.8% per year.
Fee for Service – this is a less common form of remuneration for financial advisers where instead of receiving payment from the product provider, the client pays their financial planner directly for their time and advice.  Often there will be a set fee either based on an hourly rate and/or packaged based where you can choose to pay for particular services such as a full Statement of Advice or setting up of a Self Managed Super Fund.
Which financial planning payment style is better?  Commission vs fee for service?

There has been a lot of debate in the media about which style of remuneration provides is better for clients.  The overwhelming majority of financial advisers in Australia are still commission based but our opinion is that fee for service financial planning is much better for clients as it lessens the risk of a conflict of interest.  When a financial adviser is paid by a product provider we believe that they are inclined to work for the commission rather than work for the client.  This can result in clients being “sold” into products which may not necessarily be the 100% best option for their needs.  Say your financial planner has 2 options of where to recommend you invest.  One is better for your needs than the other, but the lesser alternative happens to pay the adviser a larger commission.  You can see where the conflict for commission based financial planners arises.

In addition is the problem where most financial advisers in Australia don’t offer advice in areas such as budgeting, savings, and tax structuring as because they aren’t placing their client into a product they don’t get paid.  Many people need this grassroots financial advice from a professional and aren’t getting it for this reason.

At Financial Spectrum, we believe that fee for service financial planning is the way forward.  We know that we are in the minority of financial planners in Australia but we believe that this payment structure offers the best service to our clients and enables us to give advice to our clients in all areas of financial advice.  At the end of the day, it is our clients who pay us for our service and advice, and it is our client that we are working for.

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Myth #1: Only people who have already accumulated wealth and/or assets can see a financial adviser

This is one of the biggest myths surrounding seeking professional financial advice.  Most people believe that you need to have already established yourself financially before a financial planner can help you.  Some financial advisers will only want to work with you if you have some established assets as by advising you on how to allocate this wealth this allows them to be paid.  At Financial Spectrum, our financial advisers are fee-for-service, or charge a flat fee instead of earning a commission.  This means that they are able to assist you in accumulating wealth through things such as setting up savings plans and budgeting, whereas other advisers won’t as they wouldn’t earn a commission for this advice.  The value of advice at the early stages of your life can be just as great, if not greater than when you have already built up your wealth.

Myth #2: Financial Planners just sell their clients managed funds

Many people believe that financial planners just sell managed funds to their clients.  This isn’t true.  Whilst a financial adviser can recommend their clients invest in specific investments as one tool to help grow their wealth, a holistic financial planner will look at areas such as debt reduction, tax minimisation, property, shares, superannuation, insurance, and cash flow just to name a few.  All of these areas are important when looking to grow and secure wealth – not just investing into products.  Some financial advisers have a greater emphasis on placing their clients into managed funds as this provides them with payment via a commission.  This perhaps may explain why this myth is a common one.  Not all financial advisers are equal however.  Financial Spectrum is in the minority when it comes to offering clients truly holistic advice.  Because Financial Spectrum doesn’t earn commissions, its’ financial advisers place just as much emphasis on areas such as paying less tax and budgeting, as placing clients in managed fund investments.

Myth #3: I’ve already got an accountant, so I don’t need a financial planner.

Many people already have an accountant that they know and trust for their financial needs so they don’t think that they would benefit from seeking the services of a financial planner.  What most people don’t understand however, is that although it is very important that accountants and financial planners work together in partnership, both fulfil very different needs.  Financial advisers are trained to take a more holistic approach to your finances than accountants are.  Whereas an accountant will complete your tax return or offer advice for small business, a financial planner will work with you on understanding your life goals and help to implement a financial plan to help you achieve them.

At Financial Spectrum, we work closely in partnership with accountants to ensure that our clients receive the benefit of a team approach.

Myth #4: I don’t need a financial planner – I’m nowhere near close to retirement

A common misconception is that financial planners are only to help retirees or people starting to think about retiring.  This is very far from the truth!  Whilst it is true that there are many financial advisory firms whose target market are retirees, at Financial Spectrum we believe the true value of financial advice can be gained by starting early.  Most of our clients are younger professionals in their 20s, 30s and 40s who are at the accumulation stage of their lives.  We know that we are in the minority when it comes to our competitors but we are passionate about helping young Australians get ahead financially.  We help our clients to map out the goals they want to achieve in the short, medium and long term, and work with them to implement a financial plan to help achieve these goals.  Time is your biggest ally when it comes to setting yourself up financially – so don’t wait until you are in your 50s and 60s to start planning for the future!

Myth #5: Financial planners charge too much and get hefty kickbacks from companies they recommend their clients invest in

Financial planners have received a lot of bad press over the years and the result is that many Australians have a very negative view of the trustworthiness of the financial planning industry.  In truth, individuals authorised to provide financial advice to people in Australia are bound by strict regulations from the Australian Securities and Investments Commission (ASIC).  All remuneration received by implementing a proposed financial plan must be clearly outlined in a Statement of Advice (SoA) which must be given to the client.  This enables transparency in the financial planning process so that you know exactly how much your financial adviser will be paid in relation to your financial plan.

At Financial Spectrum, we’ve gone one step further and developed a fee-for-service or a fixed fee payment structure so that we don’t receive any commissions from any investment product that we recommend to our clients.  This means that our clients pay for our advice.  We believe that this fee structure helps to protect our clients from potential conflicts of interest.  In addition we offer a range of packages for our clients to select from so that they can feel comfortable that they’re getting value for money.

Myth #6: All financial advisers are the same.  Shouldn’t I just see the adviser at my bank branch?

There are financial advisers, and then there are financial advisers.  Whilst it’s true that all financial planners in Australia must be authorised under a financial planning licence from ASIC, it is important to know that there are potential conflicts of interest that may arise by seeking the services of a financial adviser who is connected to a large institution – be that a bank or other financial institution.  Why?  Financial advisers who are part of financial institutions who offer their own financial products (eg. life insurance and investments) will likely be restricted to a small selection of products that they can offer their clients.  This means that if you went to Bank XYZ seeking advice and the financial planner at Bank XYZ identified that you need income protection – it is likely that they’ll be restricted by the XYZ Bank to only provide you with advice to obtain an XYZ Income Protection policy.  The problem is that your XYZ financial adviser might know that a better policy for your situation can be provided to you by ABC Life Insurance, but because they are part of the XYZ institution, they can’t offer this policy to you.

The good news is that not all financial advisers in Australia are part of large corporations and therefore are better able to provide you with a wider selection of investment and insurance products from a range of providers in Australia.  These financial advisers tend to be known as “boutique” or “privately-owned” financial planning firms as ASIC restricts the use of the word “independent”.  These small boutique financial advisory firms are in the minority as many have been bought out by the larger institutions and do not have the massive monetary resources of their competitors, but they are out there and can offer you great financial advice.  Financial Spectrum is one such privately-owned financial planning firm based in the Sydney CBD.

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The trio of social, economic and political development requires striking a balance and prioritisation of goals. An essential knowledge of these three forces is imminent so as to focus on achieving and accomplishing envisaged results. One of the most important is the abundance of food in an optimal, sustainable manner and must come first which should serve as a driving force to advance further to strategic thinking for problem solving at higher levels. The use of focus groups is a very viable way in this respect. The positive understanding of associated connections between economic conditions and social development, economic power and political power, and between economic life and intellectual life-the practical and efficient use of political means to achieve economic ends is significant if, balanced with foundation theories, targeted at growth and prosperity with respect to realities and peculiarities of the environment in a gradual, organic pattern relative to specific indices, environments.
A case in point is China’s paced achievement through a period of sixty years from the Cultural Revolution era to modernity spurred by the reforms of 1978, to bring rapid development and prosperity to her large population. Theirs has been phenomenal-achieving a global position of fourth in gross domestic product, third in trade volume as well as first in foreign reserve rankings respectively! The fundamental catalysts for this dynamic success need be replicated by all nations and individuals, businesses likewise that desire and aspire to reach greater heights.
A gradual, constructive application of critical factors and specialized knowledge, always delivers astounding results in generic as well as specific cases. For example, China found the best route with Chinese characteristics distinct from others and gravitated on stability and continuity of policy, using five year target plans as a blue print for economic development coupled with opening up to other countries for cooperation -with self reliance as a pivot point. Through these, a quantum leap with advanced silver lining for the future has been made possible.This also holds true for countries like Brazil, Malaysia and Singapore. Individuals and small, corporate businesses can also replicate these feats in like manner. Indeed, the periods of backwardness can and should be transformed in a strategic, customized approach thereby skipping rut stages that are not necessary by minimizing the time frame but in a sustainable, practical way.
In the case of nations, many are centuries behind without necessary acknowledging or understanding that fact and must get all the ingredients necessary to evolve from the alien state to an attainable, contemporary development status like developed nations. There is a lot of fake development going on in many sectors which in real terms is nothing short of a mirage, exhibited by bind imitations, consumerism and the like which doesn’t necessarily constitute real development. Failure to consider these factors always manifest in apparent short gain and long term downfall.There is a lot of evidence to prove this.
The economic giants passed through stages of evolution from the medieval periods to modern times via a conscious but slow process, step by step, progressed with all the intricate inter-relationships and baffling complexities. Others can however attain and even surpass by applying all relevant techniques efficiently- easier, using unbiased information and constructively too. It is a question of how to..The knowledge is the potential power while the positive application thereof provides the enzyme for success-from the generic concepts through the scopes of training and development, planning for sustainable development, leadership development, career path development and action plan development.
Economic development being all encompassing requires all essential components for success without exclusion. The right orientation, focus, determination for goal actualization and success are imminent coupled with the right attitude, behavior and personality traits, and discipline and requisite values. So, the bottom line is for all out there to be pragmatic and utilize the available resources with the key resource being the intellect of manpower. Motivation, inspiration and positive dynamic influences play a vital role by using the right tools in an articulate and scientific manner.
Anyone can be a winner just like any nation can be a giant. Envision-imagine it, work it out and you are there. The world is yours. Get and be the best you rightly deserve to achieve prosperity with purpose. See you there!

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Financial planning

Who we are or how much we earn is of less concern as long as we can manage and plan our finances wisely. A pauper can become rich and a rich man can suddenly lose his wealth if his financial planning is improper. Usually people blame their stars for their misfortune. They go in search of astrologers who will live out of them by changing their names and houses. They find solace in blaming others be it God or stars for their backdrop. Insecurity and thoughts of one’s future might lead to depression and frustration.

“Make hay while the sunshine’s” as the popular saying goes is the golden rule every human being should definitely follow. We earn to live happily with comforts but we forget to pay ourselves for all the hard work we put in. we pay for everything in this world, do we pay ourselves for the service we do to our family, nation and society.

In the western countries they make it a habit to save 10% of their personal income for their own future use, a millionaire once said, “I am glad I am worth at least 10% of what I earn”.

Better late than never, just sit with a planner and take stock of where you are now. Jot down your financial position as of today. Set long time and short time goals in life and set a imeline to achieve that goal in time. Then carefully think about how you can achieve the goal and what you can do to go where you want to go. Attitude is very important in any major life changes that you might ncounter. Thus set your attitude as if you are planning a vacation. So you first decide the vacation spot, and then set out to make reservations, then pack

your bag and then leave.

Financial planning is just like your vacation planning. First you should fix your target, then make certain changes in your life style, like cutting down your pizza or sacrificing your cigars, then pack up or wind up your extra expenses and start the savings plan when that is dome just relax and enjoy the fruits of your unparallel and diplomatic achievement. Your money will start growing and so will your self-esteem and self-confidence and finally you are efficient and capable to finance your kids higher studies or retire peacefully with the recurring income from the timely savings.

Financial planning provides the reassurance that your future in Canada and all around the world that secures you to live in the comfort as you would like.

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