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Financial Planning

What is financial advice?

Financial advice is a process that helps you meet your life goals through the proper management of your finances.

Life goals can include things such as buying a home, saving for your children's education, managing debt or planning for retirement.

Financial advice usually involves taking a 'big picture' look at where you are and where you want to be financially. Then, by following the financial advice process you can create a financial plan, which will show you what you need to do now and in the future to reach your goals.

Who provides financial advice?

There are many sources of information about money that you can use to manage your finances, such as newspapers, magazines, friends and the Internet.

But finance can be a complex area so it makes sense to seek the expertise of a professional - as you would with a doctor or a solicitor.

A qualified financial adviser is one of the best ways to turn all the information you have about your finances into a proper financial plan.

What is 'quality' financial advice?

It seems we can get financial advice from just about anyone. But how do we know the advice we are getting is of a high standard?

The Financial Planning Association of Australia (FPA) has a recipe for what constitutes 'quality' financial advice. This is based on whether a financial adviser successfully completes the following steps:

  • Helps identify your life goals
  • Becomes acquainted with your financial background (eg income, debt levels, commitments)
  • Identifies the difference between your current situation and where you want to be
  • Prepares your financial plan, addressing your attitude to risk
  • Identifies suitable investments and/or insurance for your situation
  • Implements your financial plan
  • Reviews and changes your plan to ensure it stays up-to-date and reflects changing circumstances and economic conditions.

Financial advice is a process that helps you meet your life goals through the proper management of your finances

What are the benefits of quality financial advice?

Quality financial advice can help you in a number of ways. It gives you:

  • control over the financial planning process and over your financial outcomes
  • a long-term relationship with an expert to help you reach your financial goals
  • flexibility and the opportunity to change your strategy through regular reviews
  • a realistic picture of your financial future
  • a clear understanding of the risks to your financial future
  • information on how to manage these risks
  • an adviser who is a life coach, not a salesperson
  • information that helps remind you to consider your financial options.

Quality financial advice also helps you avoid the choice trap

In Australia there are almost 10,000 investment products, such as managed funds, to choose from. And this doesn't include the countless other options, such as direct shares and property, that are also available.
While this is generally good news, more choice can make life more complex, unless you are well prepared. A financial adviser can help you avoid making some common mistakes:

  1. Doing nothing - When confronted with a barrage of choices, the easy option can be not to choose any. It might feel comforting today to bury your head in the sand, stick your money in the bank and put your dreams on hold, but it might not help you reach your goals in the long run.
  2. Choosing the easy option - When investors pick the so-called easy option, it rarely is. As an example, some investors who invested in 'get rich quick' schemes, such as buying property off the plan, may have been left with properties they may have paid far too much for in a cooling market.
  3. Choosing what grabs your attention - Research from the United States indicates that investors tend to buy shares that have been reported in the media - what grabs their attention, whether it's the latest 'hot' fund or tax scheme. But sadly, it turns out that this is no way to make money. The researchers found the attention grabbing shares that investors bought did worse than the very shares they sold to finance these fad investments.

What stops people getting financial advice?

Many people put off getting quality financial advice because of things that they may have heard. In most cases, they are nothing more than myths. There are three myths, in particular, that keep coming up.

Myth 1 "Financial advisers are tied to a product provider"

Many financial advisers work through a parent company that also sells financial services products. Some people say they are uncomfortable with this because they feel the advice they will get is biased. But at the same time, many people feel that a well-known brand gives them a sense of security.
In the end, what is most important is to be able to deal with someone you can trust.
True independence means "focus on me and my needs". Which is why, in order to be successful today, financial advisers must legally act in the best interests of their clients.

Myth 2 "I don't want to pay for advice"

Financial advisers offer a specialist service, just as a plumber or accountant does. As such, they charge for their work.
What is important is that they are clear about the disclosure of fees, commissions and any other costs - so that you know exactly where you stand at all times.
A good financial adviser will always be willing to discuss all aspects of their fee structure. Research has found that 90 per cent of people are happy to pay for quality financial advice.

Myth 3 "Financial advice is for wealthy people"

Research has proven that households who had engaged the services of a financial adviser with an average income of less than $65,000 were significantly better off than those who had no advice. These households were much more likely to have accumulated greater wealth than similar households without a planner.
A good financial adviser can assist any customer, regardless of their income. Financial advice is no longer the preserve of the rich. It is an important decision for every Australian who wants to enhance and maintain their lifestyle.

What are the dangers of no financial advice at all?

There is always the temptation to do-it-yourself when it comes to financial advice. But the truth is that without specialist financial planning knowledge, you may not reach your financial goals.

Most retired Australian couples live on less than $20,000 per annum. At the same time, only 4 per cent of Australians think they could live on less than $20,000 when retired.

The Australian Federal Government is so concerned that Australians make better financial decisions that they have established the Financial Literacy Foundation. This Foundation's charter is to raise financial literacy levels in the Australian community.

Treasury modelling demonstrated that by following a few simple financial basics, a person earning $36,000 per year throughout their working life, with the assistance of quality financial advice, could be better off by more than $790,000 at retirement. These figures and results suggest one thing - that the only people who should do their own financial planning are financial planning advisers themselves!

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GCR Financial Pty Ltd T/AS C2G Financial Services. GCR Financial Pty Ltd is not owned by any bank, insurance company, fund manager or superannuation provider.

GCR is an independent financial advice & services group. Our independence allows us to operate freely without institutional restriction or bias.