If your only tool is a hammer

You may be familiar with the adage that to a person with a hammer every problem looks like a nail.

This is very applicable in the world of financial advice and many clients are not aware of it.

Unfortunately, when you don’t know any different you are often also oblivious to the consequences, which include:

  • Missed opportunity
  • Higher stress from strategies and products that don’t ideally suit your personality and needs
  • Higher costs and lower value-for-money
  • Missed lifestyle goals

Example Hammers in The World of Financial Advice

A tax accountant thinks a Self Managed Super Fund is the answer to getting control over your superannuation.

Why? Because they’re not licensed to recommend other off-the-shelf products. (Which, by the way give you great control without the legal responsibility of a SMSF.) And because they’re not licensed to give such advice they naturally wouldn’t spend any professional development time researching alternate options.

A stockbroker thinks owning direct shares is the best way to create wealth.

While a real estate agent or property developer thinks residential investment property is the best way.

And your mates and colleagues think the best way is the way they are doing it!

Why? Because it’s probably the only way they know. (Plus you doing what they suggest sub-consciously validates their decisions. It’s a psychological phenomenon of herding or “group think.)

(Apologies to readers in the above professions who cleverly operate outside the above generalisation. Keep it up!)

Ask Yourself

Since so many types of professions can call themselves “financial advisers” ask yourself which tool is the focus of their tool box?

You Need A Team with a Tool Box

The truth is that there is no one best way and no single tool that will be all you need through your life.

Almost everything in life requires money to facilitate it. So your financial planning and management needs to be as deep and broad as your life.

That’s a life long job that requires a diverse tool box.

Rather than doing and knowing it all yourself you outsource some of that planning and management to the financial professions.

Your best solution is to build a team of experts.

Your Team

Your primary contact when managing your finances should be a comprehensive financial planner.

True financial planners have a tool box full of various tools. They assess the problem/goal and then select the right combination of tools.

Taking the metaphor deeper, true financial planners may not actually swing all the tools themselves. After identifying the right tools they may recommend specialists for certain tools that you need.

This is illustrated in the image below:

Who to call

So when you have a financial problem or a decision you are mulling over don’t just speak to your accountant or investment adviser. They may not have the right tool for the job.

Instead speak to your financial planner who has a comprehensive, contextual view of both your situation and the world of financial strategies.

And if you don’t yet have a big picture person in your team then call me today.

What do you think?

Share your thoughts about this perspective in the comments below. I’d love to know:

  • How do you currently solve the bigger picture aspect of your financial decisions?
  • Who do you turn to for help?
  • Who are valuable categories of advice professionals in your team?

And what financial decisions are occupying your mind right now? Complete the survey here

Latest Research: You Save More by Paying For Financial Advice

Want to save more money? Then pay for financial advice. That is the one of the findings revealed in this latest research by KPMG/IFSA. Clients of financial planners on average save over $2,400 per year more.

To some people it is a statement of the bleeding obvious to say that getting financial advice is an investment not a cost; you make more than you pay.

However, I know from talking to people after my seminars that when they are struggling to save money they also mentally struggle to pay for support in creating better behaviours.

What we professionals and our clients have know for decades has today been confirmed by research – clients of financial planners save and invest more for their future lifestyle.

On average clients “save an additional $2,457 each year, compared to a similar individual who does not have a financial planner.”

Source: KPMG Econtech research for IFSA (Investment and Financial Services Association).

Personally, I charge less than that amount for my Cash Flow Coaching program, which is just like having a personal trainer for your saving. Clients typically get control of where their money goes, accelerate their debt repayment and start saving for important lifestyle goals.

When you consider how much interest you save on your credit card and other debts then cash flow coaching delivers a very immediate return on investment by boosting your savings.

So if you are a little financially unfit enlist in a boot camp for your saving. Call or e-mail me now to join my cash flow coaching program.

Product Aligned Advice is (Mostly) Irrelevant

SMH article: “Finance advisers mostly a sales force, report says” is wrong and potentially more misleading to you than product-aligned advice.

The Sydney Morning Herald will have you falsely believe that “the financial advice industry has been dealt a blow with evidence that some of its biggest names – AMP, Colonial, and BT – are mostly telling clients simply to buy products offered by their parent companies.” Read the original SMH article.

That conclusion is wrong. Believing it will cause you unnecessary stress and probably lose you money.

The reality is that this product focus is stressing about the detail and missing the big picture.

For example, product focus is like stressing about finding the best pair of mountain climbing shoes.

  • What if you’re never quite sure you’ve got the best shoes so you never set off on your trek up the mountain? (Behaviour and delay)
  • What if you set off but you’re on the wrong mountain? You get to the top and you look across and realise you actually wanted to summit a different mountain? (Life goal clarity)

The greatest cost in wealth creation is behavioural. The long term lifestyle cost of a slightly more expensive product to get you from A to B is minimal when compared to the cost of delay.

Don’t allow worry about product-aligned financial advice to cause you to procrastinate from taking positive action with your finances. The procrastination will be far costlier to your short and long term lifestyle.

Further the product has nowhere near the impact of getting the right strategy and being clear on your goals. And since goals clarification and strategy selection are the steps before product selection all good financial planners will advise you on that irrespective of them being tied to product provider. That is the true value of planinng your finances.

Stop worrying about finding the best investment product and just take positive action today towards your personal clearly defined goals.

If you need greater clarity of your goals and you need support to consistently take action then hire a financial planner to guide and suport you. They’re like a personal trainer for you and your money.

P.S. Just in case you’ve assumed I am tied to a product provider – I’m not. I deliberately choose my licensee to ensure I can recommend an extremely broad range of products across many providers. I am aligned to your best outcome not to a product. (Just ask my clients.)

Take The Financial Pressure Down

Today is Stress Down Day, to raise funds for Lifeline. As part of their promotion of Stress Down Day Lifeline conducted a Newspoll to discover what was stressing Australians.

The Newspoll found that two thirds of Australians are stressed about money, second only to being stressed about work. Does that include you?

Financially Stressed CoupleThe Lifeline poll reminded me of research published last year by Relationships Australia, which found that financial stress was the second largest contributor to relationship breakdown, affecting 35 percent of relationships.

This may be a stretch, but if we can work together to reduce our financial stress we may be able to lower the divorce rate and bring more joy into everyone’s lives.

Causes of financial stress

I started writing a list of what has caused financial stress among people I’ve met. Most of the causes fell into two broad categories:

  1. Not enough money (to do, buy or retain)
  2. Doing it for the money

In this article I’ll share some tips for reducing your stress caused by “not enough money”. Later, I’ll write about “doing it for the money”, but if you’re keen to learn how to earn money doing what you love then please call me now.

Stress about not enough money

Our stress seems to rise when we don’t have enough money for something that is really important to us. For example:

  • To join our close friends on a big interstate or overseas holiday (maybe to celebrate a milestone birthday)
  • To buy a bigger house when our family has well and truly outgrown the current shoebox
  • To keep our car and house when we lose our job and fall behind in the mortgage repayments

Our stress doesn’t appear to rise when we decide we can’t afford the $2 chocolate bar or $15 movie ticket. I believe that is because those things aren’t really that important to most of us.

Financially related decisions can also stress us, and I believe they fall into this broad category. Our stress level is affected by the materiality of the loss or by the consequence of a wrong decision. If we get the decision wrong it may mean we won’t be able to upgrade our shoebox house when we want to, so then we stress about the decision.

Save for the Significant. Minimise the Insignificant

To reduce your financial stress plan to have enough money for those things that are most important to you. This is a personal thing and is based on your values.

Once you have plans to be able to afford the most important things in your life you can spend the rest of your money on whatever you want, guilt free.

You need to move your thinking from “next pay” to “next year” and then onto “next decade”.

I believe it is through spending too much on daily insignificant things that we end up not having enough for the significant things. This is often because the significant experiences and achievements are lumpy and irregular, so they can sneak up on us.

Bring far away important things into focus

”binoculars”Here’s an exercise that you can do.

Get a blank piece of paper and place it in landscape orientation. Across the middle from left to right draw a thick line. The left represents now; the right represents your passing, say at age 100.

Divide this line representing the remainder of your life into bite size chunks. The length of each chunk is not fixed, just make it meaningful to you. You may like symmetry and therefore make each chunk an even five years. Or each chunk could be of different length representing different life stages you have in mind.

Next fill the rest of the page with all of those achievements and experiences that are really important for you in each of those meaningful chunks of life. For example:

  • Career transitions you’d like to make
  • Places you’d like to see in the world
  • Experiences you’d like to have with your family
  • Time out of the workforce to study, reflect or travel
  • Contributions you’d like to make to your community and world

For inspiration on what is really important reflect on your personal values.

Now implement plans

Implement a clear plan to manage your money so that you achieve and experience what is really important to you. Then you can happily spend the remainder on whatever insignificant pleasures you want, guilt free.

This is how you can achieve what I call financial fulfilment. And this exercise is part of the process that I call Fulfilment Financial Planning. To learn more call me on 1300 669 101. I take clients from all around Australia and would love to hear from you.

What a CFP represents

Certified Financial Planner logoCertified Financial Planner, or CFP is the top level certification for financial planners. It takes quite a bit  of knowledge, skill and experience to be awarded this certification.

When seeking financial planning advice, especially for the first time I recommend that you start by speaeking with CFPs. You can find them on the Financial Planning Association website.

To raise awareness of Certified Financial Planners the Financial Planning Association has released a 60 second video, which you can watch below (or here on YouTube.)

Please leave a comment below to let me know if you think it is effective. Would you now want to see a CFP in preference to any other financial adviser?

I genuinely want to read your comments as I often send my two cents worth to the FPA. You can leave an anonymous comment if you like. Thanks.

Defining TRUE financial planning

I wish I could tell you that there was a definition of financial planning that the entire industry, regulators and government agreed upon. Sadly that level of consensus is something I can only dream about in my lifetime. To me true financial planning is about maximising the likelihood that you have the financial resources to always live the life you’d love, now and in the future. In shorthand I think of this as financial fulfilment.

During April I’ve conducted a couple of days of Coffee Cup Coaching sessions for some of the team at Chevron here in Perth. Interestingly some of the feedback has been that it was good to have gained an insight into financial planning. (Quite a few had not seen a financial adviser of any sort before.)

Why did I write “of any sort” above? Well, because there are no restrictions on who can call themselves a financial adviser.

And the sheer breadth of what could come under the banner of “financial advice” creates a lot of confusion. The sad consequence of the confusion is that in my experience most people have a very incomplete picture, which leads them to avoid seeking financial planning advice.

True Financial Planning

I wish I could tell you that there was a definition of financial planning that the entire industry, regulators and government agreed upon. Sadly that level of consensus is something I can only dream about in my lifetime.

So I am going to share with you my vision of true financial planning that I strive towards when working 1-on-1 with people.

My definition

To me true financial planning is about maximising the likelihood that you have the financial resources to always live the life you’d love, now and in the future.

In shorthand I think of this as financial fulfilment.

It’s much more than just investment advice

Every day you make many decisions that involve or impact upon your money, that impact upon your financial resources.

The lifestyle you lead is the cumulative impact of the daily decisions you make in managing your money (and other things). The breadth of the possible lifestyle outcomes over time is illustrated below.

Financial Outcomes Over Time

Some of those possible outcomes may fall within your vision of “living the life you’d love, and loving the life you’re living”. Many outcomes probably don’t.

Managing Money with Purpose = Financial Planning

Remove all the preconceptions from what you’ve heard or experienced and zoom up to a bigger picture. Financial planning is simply managing your money with purpose.

The purpose being to achieve the life outcome where you have the money to be, do and have what is really important to you.

Viewed at that higher level managing your money with purpose and achieving your desired outcome is something you could do yourself. (If you spent the time to acquire the knowledge and expertise.)

A qualified financial planner’s role is to help you achieve your desired life outcome quicker, easier and more enjoyably than if you do it yourself.

True financial planning in practice

In practice true financial planning is a dynamic, ongoing process just like your life is. The key conceptual elements are illustrated below.

Financial Planning Process

It seems obvious to start with your goals. My experience has been that many people can’t clearly articulate these, and have difficulty prioritising them. In that case you go back (or deeper) one step to uncover your values, to understand what is really important to you.

Your life experience influences your values and they shape your tangible goals. Your goals filter in the appropriate strategies, which in turn illuminate the every day tactical actions you need to take to get the lifestyle outcome you want.

That is why there is no cookie cutter, no one size fits all. And it is also why you should not automatically do what your mates or colleagues are doing. They’re not you – you are unique.

The value of true financial planning advice

When you consider that true financial planning is about maximising the likelihood you will be able to always live the life you’d love the value is immeasurably large. And the biggest benefits are the intangible peace of mind and comfort.

Conversely, the cost of not doing it can be immeasurably large on the downside. (Know anyone who is a miserable soul because they “can’t afford…”?)

You can read more detail about the value of financial advice here.

How to have the money for what’s important to you

If you’re not living the life you’d love and part of the reason has to do with money then a true financial planner can help. Similarly if you are not confident that you’ll have the money in the future to live your desired life.

And if you’re not clear on what you want or what is most important to you then a really good financial planner can coach you through uncovering those things. That will be the first part of their process of working with you.

If you like the sound of true financial planning that I described above then call me because that is what I do.

Fee based advice hard to find

If you are wary of your financial adviser being biased by commissions then you will want to work with an adviser who charges fees and rebates commissions to you. But according to new research released today such an adviser may be hard to find, with only approximately 1 in 10 Australian financial advisers focused on charging that way.

The research by Investment Trends found that just 11 percent of Australian financial advisers now derived a majority of their revenue from pure fee-for-service models. (Read more here.) Some good news is that this number is increasing.

One very interesting result from the report is that: “those planners with over half their revenue derived from pure fee-for-service were likely to spend more time discussing planning for financial and lifestyle goals…”

To me financial advice and wise money management is not actually about the money – it’s about the lifestyle that you want money to facilitate.

So if the first questions you want your adviser to ask are about you and your lifestyle goals, and not about how much money you have to invest, then this research suggests you should seek a financial adviser who charges fees. That way you are more likely to find one who will ask you about your goals.

Don’t know where to start? Then start by finding advisers whose licensee is not owned by a product provider. That will eliminate about 80 percent of the market.

(This is not to say there aren’t exceptions to the general guide, but if you want a clear path through the maze then this is your quick start approach.)

Australia’s Top 50 Financial Advisers

Released last Friday, the February 2008 edition of The Australian Financial Review Smart Investor magazine announces the 2008 members of the annual Masterclass for Financial Planning. If you are seeking financial advice but unsure how to filter the thousands of financial advisers into ones you can trust to know what they are talking about, then this list is a great place to start.

By now your sub-conscious may have triggered that I may be writing about this because I am on the list – and you are right.

For the third year I have been acknowledged as one of Australia’s Top 50 Financial Advisers. Read more about the AFR Smart Investor Masterclass 2008 here.

AFR Smart Investor Masterclass 2008 Logo

Are you starting 2008 in peak financial fitness?

Your financial fitness is how well you manage your money on a daily basis. Just like physical fitness helps your health, so does financial fitness help your financial health and weath.

Discover your financial fitness by completing our brand new Financial Fitness quiz now. (It’s free and takes about 70 seconds).

Trust pros for financial advice over friends and family, survey suggests

About one in six Brits has received bad financial advice from their friends and family and have suffered financially and emotionally as a result, according to new research from the specialist mortgage provider (Birmingham Midshires)Almost one in five (17%) wasted a lot of time in the process. Just over one in 10 (12%) admitted that their relationship with the person who gave the advice had deteriorated. A minority of those questioned (4%) lost an asset such as a house, a car or another belonging of value.(Read the full article by Lorna Bourke here on CityWire .)

The results of this study reinforces the message of the “Dazza” commercials run by the Financial Planning Association of Australia in 2005. (View all three videos here.)

Following advice from unqualified people, no matter how well meaning, is high likely to be inappropriate for you specifically.

Here are some reasons why:

  • The unqualified person may have much broader knowledge than you but it is probably not broad enough. They have probably only researched strategies and products that broadly fit their needs and goals.
  • On the surface of what you each publicly share there may appear to be similarities between your situations. But it is in the depths that the subtle nuances appear. In truth your needs are probably vastly different to theirs.
  • Human nature results in us generally crowing about the upside and the benefits while glossing over the potential downside and risks. You need to have a full picture and make an informed decision.

Do yourself a favour – save time, emotional energy and money by seeking good advice from a fully qualified and licenced financial adviser.

Where do I start?

I love receiving phone calls of enquiry from people who are new to advice. Often the calls start with them revealing that up until now they’ve not paid much attention to their money at all (besides spending of course) but for one reason or another they’ve decided to take action now. I love it because it means that one more person is taking control of their financial future, which is what I am all about.

The very next thing such callers often reveal is that they have no idea what advice they need or what they should be doing with their money at their stage of life. To help them I have released a guide on my corporate FINDRE website to identify the top priorities to be implementing at your life stage. You may also like to consider this as a guide of where to start your journey. Read the guide “Financial Advice by Life Stage” here.

One other tool that may be of use is my online Financial Health Check-up.  The report tells you what you are already doing well, where you have gaps and what you can do to fill those gaps. It is a terrific resource to be armed with before you contact your first financial adviser. (It could even be a good tool to check-up on your financial adviser.)

What is the value of financial advice?

Socially when I speak to people who have never seen a financial adviser, and are still reluctant to do so, one of the main reasons has been that they don’t see any value in using a financial adviser. Sometime they sense that an adviser delivers some benefit but that those benefits don’t outweigh the costs and therefore don’t provide enough value. Does that sound similar to your view?

Almost everything that we do, buy and enjoy in life is facilitated by money. So, the benefits of a solid financial foundation are far reaching in our lives. Conversely, the cost of inadequate financial management can have a deeper impact than you may be aware.

A Financial Adviser partners with you to help you reap the rewards of a solid financial foundation. You could do it yourself if you invested the time. A Financial Adviser acts like a coach to help you achieve the benefits quicker and easier than if you did it yourself.

The benefits of financial advice are both tangible and intangible. In fact, in my experience of working with clients often it is the intangible benefits that have been the most important.

On my corporate website at FINDRE I have published a detailed article about the tangible and intangible benefits of financial advice. If you are interested in partnering with an adviser but first want to learn more about the value of advice I encourage you to read the article now.

Profit sharing with your adviser

If you paid your financial experts solely on the basis of a percentage of the benefit to you of their recommendations, what percentage would you prepared to give them?

I just had a conversation with a client who I sense is very fee conscious. Fee appears to be the major, initial focus and by comparison benefits seem to be almost overlooked. Conversion of my dollar based, fixed fee to a percentage of tangible benefit was one of the things discussed. (That’s ignoring all of the intangible benefits of advice, which you can check out here.)

If a financial adviser recommended a strategy to you that gave you a benefit of $10,000 this year how much would you be prepared to pay them for that advice? Would you consider a 60:40 split (i.e. you pay them $6,000)? Or would you be prepared to share more or less with them?

What percentage of the tangible benefit would you be prepared to pay to your adviser?


Having now voted please consider this analogous situation. How much of your employer’s total revenue (income) do you expect them to pay in total wages to their work force?

Is it reasonable to set the split exactly the same as the split you suggested above, or do you think it is more reasonable to be higher or lower?

In considering your answers to the questions I have posed you may find the following statistic interesting. It is my understanding that on average around 30% to 35% of total revenue is spent on remunerating and rewarding the workforce.

Does that change your answer at all?

How’s your financial health?

How’s your financial health? Is everything in tip top working order, or are there areas being avoided and showing signs of wear and tear?

Well, if you suspect that your finances are out of shape you are not alone. The average score from my online financial health check-up is just 39 percent.

That low average is to be expected given that we don’t receive much if any financial education when we are growing up, and then none afterwards unless we seek it. So we leave school not knowing what we don’t know.

But wouldn’t it be great to be enlightened as to things we could easily do that would make quick gains and we didn’t even know about? That’s why I created the online financial health check-up to produce a very comprehensive, personalised report.

And the great news is that until Monday December 3rd you can complete the check-up and get three extra educational tools for half-price. It’s all part of my mega Christmas bundle – check it out now.