Financial advice is expensive. But it is also incredibly valuable. When we’re unwell, we see a doctor; when we have legal issues, we speak to a lawyer. Professional people provide education and guidance in many areas of life. They help us understand and cope with the uncertainty, worry and impact of unexpected situations when we do not have the expert knowledge that is required. Seeking financial advice is no different.
The key is to understand the value of financial advice.
Advisers often see people balk at the flat fee we quote when we first meet them. Generally speaking, to provide a complete and legal financial strategy for a new client costs a few thousand dollars, depending on the complexity of their situation and, often, people don’t want to make that initial outlay. This is where it is imperative that clients understand exactly what they are paying for and the value it will bring to their lives.
Kim Payne keynote speaker and business coach to financial advisers, explains:
‘The key is being able to succinctly explain and consistently demonstrate why someone should work with you, pay you, stick around and refer you.’
So, how do you quantify the importance of correct advice?
Things have changed since the 2017 Financial Services Royal Commission Report was handed down. Previously, advisers were paid in commissions from investments and insurances. Now, we’re not. The removal of commission-based payments has reduced the potential for compromised advice and conflict of interest. It protects clients from unscrupulous practices. But now, independent financial advisers have to charge a flat fee to provide a service to their clients. We must provide a quote up front – and this can be daunting for people new to the financial advice world.
Legally, we can’t provide personal financial advice in any form unless we supply clients with a Statement of Advice (SOA)
Creation of an SOA and Financial Strategy involves:
An initial in-depth client meeting
Time spent getting a complete understanding of the client’s financial position, lifestyle choices, dreams and goals
Research into appropriate options for managing debt and investment to create the future they desire
Discussion about protection from life’s unexpected events – estate planning and insurances
Retirement planning (even if that day seems years’ away)
Exploring how technology such as budget-tracking apps can assist to reduce time spent worrying about finances
Further client meetings to discuss and explore their options
Education so our clients can make fully informed decisions about their money
Only then do we prepare the statement and strategy documents. To properly complete a comprehensive analysis takes time. Nowadays, SOAs are provided yearly to onging clients, which involves more meetings, discussion, research and exploration of options.
One of the issues with cost is that clients don’t see an immediate benefit
While we can help you clean up your finances, budget better, reduce debt and build a secure future, you’re in it for the long haul. There is no instant gratification and no immediate return in the world of financial advice.
My job is to help my clients understand the pros and cons of their financial situation so they can make informed decisions
Often this does not simply involve finances, they also have to weigh up the impact of lifestyle decisions and life choices. In many ways, I’m a sounding board during incredibly personal events in their lives. My knowledge and understanding allows me to show my clients the entire picture:
Potential value of their decisions
Consequences of their choices – e.g. tax implications and associated costs
Bare facts – when it comes to lifestyle choices and spending, it is important to be aware of the impact of emotions
Research – what their life will look like in five years’ time, or when they retire
Working with a financial adviser is a long-term, personal relationship. While your initial outlay may seem exorbitant at first, the safety and security you gain in the long run will assuage your fears and put you in a stronger and more effective position. The value of ongoing financial advice will flow into your finances and your life.
To get a complete understanding of your financial potential, please contact TruWealth on 03 8648 6534 or email contact@truwealthadvice.com.au for financial advice.