Author: Kristy Coulin
Having worked for more than 15 years in the Financial Advice industry, I have heard many popular myths as to why people don’t need specialist advice. So, I want to take this opportunity to bust some of these wide open and focus on the top three financial advice myths I’ve encountered lately.
Financial Advice Case 1: The Investment Client
“When I have money to invest, I’ll come and see you”
A common goal for many new clients is to accumulate wealth for their retirement and children. This discussion tends to focus on Superannuation accumulation first, as it is often the largest asset people hold.
Whilst discussing asset classes and how you can invest in each of these sectors, people start getting excited. Many are not previously aware that they can change how their Superannuation is invested and tailor it completely to their situation (depending on your fund).
Many might not also know that investment options are available outside of Superannuation. You can establish an investment account via a platform and invest in shares, managed funds or exchange-traded funds – or you can invest in these same investments directly.
One client was excited about changing their Superannuation investments to improve capital growth potential and then said, “personally, in the next 12 months, I should be able to save a bit of cash. So, when I have $50,000 – $100,000 available, I’ll also come and see you to get advice around investing these funds.”
It’s a myth that to have an investment portfolio you need a large lump sum. In fact, the opposite is true. You can start an investment account with a balance as small as $2,000 and deposit regular amounts of as little as $200 per month. We consider these regular deposits to be more important than your initial investment as each dollar is averaging the cost and compounding the income, which has the benefit of faster capital growth compared to if you were to wait to invest. It also reduces the risk of trying to time the market.
Many people want to accumulate wealth and save into a bank account set aside for their children’s education or house deposit. However, as interest rates are at a record low, leaving funds in cash or term deposits offers little long-term growth. Alternatively, by investing these funds in suitable investments you have the potential for capital growth as well as receiving investment income.
Those who have utilised this strategy are usually pleasantly surprised to find that they save so much in one year and that their account balance had grown significantly more than expected. One client was even able to accumulate enough in their account over 10 years to give their two children enough for a house deposit.
Financial Advice Case 2: The Insurance Client
“I have insurance in place if I die, that’s all I need”
It’s simple enough to understand that Life Insurance is paid when you pass away. But did you know most people who hold Life Insurance are significantly underinsured? *
A large portion of the insurance cover held by Australians is default cover inside of Superannuation, which tends to remain unchanged by the member for the life of the account.
At CCFPG, we are passionate about educating our clients on the different covers available and what the purpose of each is. If you cannot identify what you require; you are at risk of not only underinsuring yourself but also paying premiums for insurance you may not need.
One client recently said that they had $500,000 of Life Insurance in place so they were sorted – they didn’t need any other cover.
After advising them on other personal insurance available, such as Income Protection, Trauma and Total and Permanent Disability, they soon realised they weren’t as sorted as they thought.
As the sole income earner supporting a partner and two young children, if they are unable to work due to an accident or illness, the whole family’s income and lifestyle disappear.
This realisation was a light bulb moment for the client, and they were determined to protect their family so and have peace of mind that they had the necessary cover in place.
The second part of this conversation was the Trauma cover. From our experience, Trauma is one type of insurance most clients feel is unnecessary. However, it generally has the highest claim rate. The more environmental and lifestyle evolution contributes to critical illnesses, the greater the probability that you may need to rely on Trauma cover.
Insurance is an expense we all hate paying for. But why are so many people prepared to insure material items like their car or house so readily when you and your earning capacity are just as, if not more, important?
“I just need help filling out the Age Pension Application, I don’t need any advice”
We can all agree Centrelink can be difficult to deal with. We receive many enquiries from people who just want someone to fill out the forms for them and get their payments started.
For a Financial Adviser to do their due diligence, we need to review the client’s overall situation and provide advice which would include their request to apply for Centrelink.
At this point, a client might say that they just want help with the application – not financial advice. However, they may not know that certain assets are exempt from Centrelink, and by simple rearrangements to their current assets, they can ensure their long-term goals are met, whilst increasing their entitlements at the same time.
One particular client in this position was happy to proceed with our recommendations. Their Age Pension entitlements increased by $26,000 over the next three years, whilst the tax payable by their Estate upon their death was reduced by $69,000.
The rules around Centrelink are constantly changing and unless you are in the industry it can be difficult to know the options available to you and how to maximise your benefits.
Specialist Financial Advice Means Greater Returns For You
These examples highlight the importance of seeking advice from a Financial Planning specialist. With in-depth industry experience and technical expertise, CCFPG can support you by ensuring that all aspects of your financial situation have been taken into account and appropriate plans are in place.
We help people achieve their aspirations. We deliver personalised financial planning strategies for your peace of mind – so you can focus on what matters most.
Know that your financial strategy is sound with a complimentary financial health check from one of our Financial Planning specialists. Call us or book online to secure your complimentary first meeting with our advice team today!
Are you ready to get financial advice on the Central Coast today? Central Coast Financial Planning Group has financial advisers who can guide you through complex matters like purchasing a business with your super and many more! Contact us today at 02 4323 2877 to book a complimentary appointment.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.