When you are looking for financial advice, it will make the process far simpler if you know what kind of advice you need. Believe it or not, there are different types of advice out there. We'll talk about the most common types here:
So the question becomes, are you wanting to fill a specialist gap that you have or are you wanting someone to manage your whole position across all different areas of your financial life? Depending on the type of advice that you need will largely determine the type of advisor you are looking for and in turn, the amount you will pay for that advisor.
$0 - $3,000
"Do It Yourself" Clients are clients who feel quite confident in managing their finances and are simply looking for a learning opportunity to better prepare them. The DIY Client may also be a client who is interested in seeking help from a professional, but is not entirely ready to commit to a working relationship with an advisor.
DIY Clients looking for free or very low cost help should engage with social media pages of the advisors who are sharing tips and insights regularly. DIY Clients who are interested in making a small investment in to their financial knowledge should look for the advisors who have online, educational programs and other short course type initiatives to condense the fundamentals and possibly even tech software to make navigating a DIY world easier.
This is an avenue that many clients pursue before they are ready to take on an ongoing advice relationship. Some advisor firms will even run short discovery calls to give these clients a head start on the journey.
The DWY Clients are clients who would like professional help to kickstart their financial journey, but intend to manage their financial world on their own once they have the strategy, tools and resources they need.
This type of client is becoming more common as information becomes more and more available and software is becoming more user focused and user friendly. We believe that this will be a space where many Australians operate in the future.
However, there is a catch. Law industries and economics are changing so rapidly these days that should you choose to be on the DWY journey, you will need to keep up to date with the most recent changes and market movements. Setting your strategy up front with an advisor and then finding a platform to stay informed is key to the success of managing your affairs in the future.
Typically we do not see many advisory groups operating in this transactional space, though we believe this will change in the future, given that there can be a substantial amount of research and strategy needed to cover a full financial foundation. The cost of this advice may be significantly higher than that of an ongoing relationship. Either way, you need your advisor to understand where you're heading so they can map out your current and future needs and contingencies for them so you can follow the map and ideally stay up to date with the changes in legislation and markets overtime.
The DWY client should look for an advisor with educational programs and the option to work together to build the strategy or financial map. This may also be a hybrid with the DIY client where you set the strategy up front and you stay informed via an online programme.
The "Done For You" Clients are clients who want someone else to completely manage their financial journey for them. This may be a client who is not confident in their ability to achieve their financial goals on their own or possibly a client who is confident, but would prefer to not dedicate the time necessary to run their finances. This client should seek out a long-term relationship with an advisor that is renewable on an annual basis.
The value of this advice will largely be determined by the scope of work. For business owners, this can be substantially higher if the advisor gets involved in assisting with the business financials and relating them back to the individual personal circumstances.
For salaried employees, this will be largely determined by the scope of work and the amount of ongoing work you would like the advisory firm to participate in.
Many advisory firms now have fixed fee packages for clients that are mapped out based on the cost of delivering the advice. Typically, this is based on an up front fee for the research, strategy and implementation and an ongoing retainer with different service levels based on your different service requirements.
The cost of having poor or wrong advice can be life changing.
Having operated for over 20 years in the world of financial advice, what we have seen is the sometimes tragic ramifications of poor or no advice.
We have had many clients come to us over the years who have not sought advice until one of their loved ones had passed away. In a number of these cases, there was very little we could do and families proceeded to implode due to incomplete or no estate planning. We have seen clients who attempted to get their death benefit payouts of their loved ones have to fight for them- sometimes for multiple years- before their insurer or the superfund would pay them out.
We have seen far too many people seek advice on how to manage on very limited resources due to the lack of preparation of a personal protection plan. Good advisors will challenge clients around what they need and what they want and find a happy balance so that clients are protected even in the worst of times. We have seen guys that have not had enough personal protection leave their families destitute and struggling. We have also seen clients who have forgotten about their insurance over time and ended up paying a small fortune for policies that they could have paid cents on the dollar for had they been structured correctly.
As you can see, there is a lot to consider when choosing a financial advisor or deciding how much to spend on one. However, hopefully the biggest take away from this is that there are many factors that determine the cost of a professional advisor and sometimes, the price of poor advice or no advice at all can be the most costly.