Is it worth paying a financial planner?

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Who hasn't agonised over which financial product or strategy to use when making an investment decision?

Critics put that down to a lack of financial literacy, but that can ring hollow when you consider the complexities involved and the risks of getting things wrong.

The stakes are high when making major financial decisions: markets change, products change, regulations change, as does tax. Keeping abreast of it is challenging no matter how financially literate you are, and getting professional advice may be the answer.

is it worth paying a financial planner

A study comparing the experience of advised clients versus unadvised clients found those who work with an adviser fare far better.

When asked how a financial adviser helped them, the top three reasons they gave were: reducing financial stress and worries; help getting the most out of a financial situation; and building a realistic plan for a comfortable retirement.

The research, conducted by the Financial Advice Association Australia (FAAA), found that clients of financial advisers reported higher levels of financial satisfaction despite the current economic uncertainties.

Its annual Value of Advice Index, which compares the personal experience of people who have worked with an adviser to those who haven't, found clients experienced less financial stress and had a clearer sense of purpose than those who were unadvised.

The responses were measured across four key metrics: quality of life, financial confidence, financial satisfaction, and their experience with their adviser.

David Sharpe, a certified financial planner and chair of the FAAA, says the results show measurable differences between those who navigate their financial journey alone and those 
who work with an adviser.

"The study was undertaken at a time when many people are experiencing cost-of-living pressures, from their supermarket shopping to their mortgage. In this environment, it is fantastic to see that those who work with a financial adviser feel more financially secure and able to face current challenges."

According to the study, four in five people who use an adviser are confident of solving most challenges and nine in 10 feel financially secure and tangibly better off.

Eighty per cent are less worried about money since receiving advice, 83% feel they cope better when faced with health issues and 49% say financial advice has positively impacted their family life.

In total, 94% of clients say they trust their adviser to act in their best interests, and 93% say their advisers helped them manage financial risks.

"The improvement in the Value of Advice Index is consistent across generations, with advised Gen Y, Gen X and Baby Boomer clients all reporting better quality of life, financial confidence and financial satisfaction when compared to non-advised Australians," says Sharpe.

Aren't financial planners just for wealthy people?

It also busts a number of myths, he says.

"We often hear that financial advice is only for the rich, but the study shows that nine in 10 clients earning $120,000 or less a year who work with financial advisers feel financially secure, which is higher than unadvised consumers on the same level of income."

The study shows that nine in 10 clients say the benefits outweigh the costs.

"We hope more Australians will recognise the value that financial advice can bring to them, in helping them manage their financial situation and provide peace of mind," says Sharpe.

It concludes by saying: "Overall, this year we have found that in times of uncertainty and hardship, financial advice delivers perhaps even more value, not only protecting finances but providing additional peace of mind and support in decision making."

How can I find a financial adviser?  

"Advisers tend to work with similar types of people, so in your social circles, if you've got a friend that trusts their adviser, it's likely you're going to feel comfortable with them, too," says

Marisa Broome, a certified financial planner and principal of Wealthadvice.

"But I wouldn't speak to just one financial adviser. We've always encouraged people to shop around because it's a personal relationship. Most advisers offer that first meeting for free, 
so you can spend half an hour with them to see whether you like them or not."

Once you have decided which financial adviser to use, you'll need to provide your financial details, such as assets and liabilities, as well as personal information.

"The adviser can't make good decisions or recommendations if they don't have all the information about you," says Broome. "Some advisers do it using technology, some send out bits of paper.

Some do it over several face-to face-meetings with the client. It's all part of building trust, knowing enough about the client so you can help them.

"A client may say they're a 'conservative' investor, but when you look at their wealth they've got millions of dollars in shares, and quite speculative shares, and they think that's conservative.

"Other people would think that's wild and risky. You've got to get to the bottom of what they want.

"Some people want to spend $150,000 a year and they've only got $150,000 in super. You've got to work out how they're going to get there. And winning Lotto is not necessarily a financial planning strategy.

"The adviser may not put the client in an industry super fund. They may want to put them in a wrap, or they may want to get them into an ongoing advice relationship, and if it's right for the client, that's fine.

"But for a lot of clients - someone with $500,000 in super - they probably just need to be in an industry fund."

What should I ask my financial planner?

When shopping around, Broome recommends you ask the adviser what their average client looks like. "Do you have clients that look like me? How do you look after them? Are you expecting me to be in an ongoing advice relationship with you? Are you prepared to have clients that you only see every few years?

"Not everybody needs to be in a complicated investment structure. Not everybody needs to see their adviser every year.

"But if an adviser is giving them full-on complicated investment advice and they need the client to make investment decisions, then maybe they need ongoing advice. But not everyone's wealthy enough to have that complexity."

Finally, you may be able to get a tax break too, says Broome.

"We've had a change in the ATO ruling on deductibility of advice fees. Ongoing fees have been deductible, but upfront fees were always part of the capital cost," he says.

"They're now deductible as they relate to tax - and super is a tax issue. So that's a positive."

For more information see moneysmart.gov.au.

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Vita Palestrant was the editor of the Money section of The Sydney Morning Herald and The Age. She has worked on major metropolitan newspapers here and overseas and has won several prestigious journalism awards including the 2001 Citigroup Award for Excellence in Journalism, Personal Finance Category.