Originally posted by CAFA1234 here:
This same observation, in only a slightly different form, was raised relatively recently by tech/a on the "House prices to keep rising..." thread. It deserves the same answer I gave then, so let me repeat it.Serious question - where does one get 'good' financial advice?
The average qualified financial planner will give you
average, often 'big 4 bank' sourced, generic plans focused on diversification by use of various mutual funds. They are SO risk adverse that it is almost a joke.
If you are a qualified FP yourself (as you have indicated at the end of your post), you would know that what an FP can and cannot do is largely determined by the compliance departments of the Australian Financial Services Licence holders (also sometimes called "Principal Dealers").
These guys have two missions in life: First and foremost to be risk averse, because they don't want any court cases against their Authorised Representatives, and second to keep it all as simple as possible, so they don't confuse the most feeble-minded, computer-illiterate ex-life insurance agents still found amongst their Reps. ;-)
This is why trading/fast churn is essentially not allowed at any time and also why they tend to frown on any direct investments (shares etc) which are outside the Top 200 and/or not covered by their preferred research house. Many will not even allow instalment warrants (outside of a Telstra float) or similar instruments.
Similarly, placing all your bets into property (as tech/a was saying everyone should have done back in early 2000's) or any other single asset class is a no-no in any circumstances and generally pretty silly anyway - no matter how smart it may look in hindsight. The fact that you can use ridiculous gearing levels in property speculation is not a justification - you may be comfortable with that level of risk, but a prudent adviser should not be.
There are two main reasons here for using managed funds: The first one is that in this way, financial planners do not have to get too involved with the actual investments. This is important, because sadly, many financial planners have little idea about investing or even about what it is they are recommending. I know it sounds strange, coming from a practising CFP, but hey - let's be honest here - this is how so many FPs kept recommending the Basis Yield Fund as "international fixed interest" fund and sold it to risk-averse investors as such!
Secondly, because the major institutions typically make most of their money out of funds management rather than the cut they take out of their Reps' income for services rendered, they much prefer if those Reps act as salesmen and just stick to recommending products from a narrow product list. This is how you get so many advisers placing SMSF clients money into a platform and then in managed funds, thus adding another 2% or more in totally unnecessary costs. It makes life easy for the advisers and makes money for the licence holders. Shame about the clients, but most of these advisers know no different, so they would be genuinely surprised if you told them they are not doing the right thing.
If you want better than that, you need to go to someone who preferably has their own AFS licence, charges on a *true" fee for service basis and is not in any way linked to the majors. Even the word "boutique" has been abused sufficiently now in this country that we have the likes of Hillross (fully owned by AMP - and check out their Financial Services Guide for the pages and pages of product-related conflicts of interest!) calling themselves "boutique"...
I'm not surprised - if you went to the banks, you should not expect technical proficiency from those planners. Their job is to sell you the bank products, period.I had hourly paid planners from 2 of the large bank planning groups create plans for me back in 2004/6 and although interesting reading...
True, but interestingly enough, the vast majority of those planners were linked to the main stream dealer group anyway.And if you go for a specialty financial planning house then be very careful - much of the mezzanine finance for house developments (and now lost money) was sourced via financial planners.
Besides, the dodgy schemes invariably pay upfront commissions of up to 10%. My opinion has always been that if anyone wants to/can afford to pay so much to the salesmen of their product, then the product probably cannot stand on its own merit/is dodgy and it should be avoided.
If you go to a fee for service planner, you are unlikely to encounter these type of products.
Having said that, you can still lose money - even the best planners rely on research and you just need to look at the likes of Centro, Allco, MFS and ABC Learning Centres to work out it's easy to get burned. Every one of these was on the "Strong Buy" list of most reputable analysts even when their share price had halved. If your licensee stops you from having hard stop losses on your clients' portfolios (because invoking those could qualify as "trading"), then you will still suffer losses.
That should not be a problem. It is possible to model such scenarios without any difficulty. For example Coin Financial Software (not really appropriate for home use though - too complex, with many modules relating to client management etc, plus the annual licence costs close to $8,000 per user) can model as many strategies, entities and income streams as you can throw at it....neither could plan in different income streams kicking in at different times within the pension phase.]
Very true, but hey - isn't that the case with anything? ;-)Like accountants or lawyers, average planers are two a penny, but good ones are very difficult to sniff out.
You'll just need to do the hard yards and find someone who knows what s/he is doing.Serious question - where does one get 'good' financial advice?
I don't think a spreadsheet, even if you could put one together with all of the necessary parameters, would be a viable way to do this. Keep in mind you need to cater for legislative changes on a regular basis (i.e. at least annually) as well.Does anyone know of a sophisticated software model e.g. excel spreadsheet to model lifestyle financial planning?
Did you only do the theory, or did you actually have any practical work experience in FP? -- I guess going through the study course and then writing a plan (presumably without the experience or the right tools) would have been a lot of work for little use, if you did not intend to use it eventually.Declared Interest:- qualified financial planner DPF 1-8 inclusive.