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"No two financial plans are the same, especially if you are at different stages in your life."

By InvestSMART · 13 Jul 2012

By InvestSMART ·
13 Jul 2012

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There are many different kinds of financial planner, and making the best use of one means engaging an expert who can carefully steer you towards economic success, rather than hiring someone to rescue you from a financial mess.

A large number of people in different professions - ranging from life insurance brokers and real estate agents to lawyers, accountants, tax agents - and even property developers and bank tellers, can legally call themselves financial planners.

However, the Financial Planning Association of Australia is the only professional body that assesses and awards the Certified Financial Planner or CFP title, which it describes as the highest certification available to financial planners worldwide.

The association says no two financial plans are the same, especially if you are at different stages in your life. For instance, a person aged in their thirties will need quite different advice from someone in their sixties.

Young adults, who may be starting out in life with a HECS loan to repay, need to develop good habits early and start putting money away for their future.

"The earlier you start saving, the more likely you will reach your savings goal," the association says. "You should also consider protecting your income in case you can't work due to illness or injury."

Those further along their career path who have some cash to put away for their future should not lose sight of the long term.

"You'll want to avoid any excess tax and maximise any benefits available to you. If you've started a family, make sure they are protected by taking care of life, health an income protection insurance," the association says.

"In later years or retirement - with 20 years or more of retirement ahead of you - you will need to keep up your quality of life once your salary or other employment income stops.

"If you have savings and investments, you will need to generate enough income from them to meet your expenses. You will want to pay as little tax as possible once you retire so you have more to spend or save."

In general terms, financial planners function best as guides towards success rather than as salvagers from ruin. As a first step, people in financial trouble are able to see financial counsellors available free of charge through community organisations.

Both financial planners and counsellors are regulated by ASIC, which has a website at www.moneysmart.gov.au to help people learn about managing their money and achieving financial goals, and it has some of the best tools and resources available.

The Financial Planning Association's website at www.fpa.asn.au also has plenty of advice and resources, along with a facility to locate a qualified financial planner in your area.

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Frequently Asked Questions about this Article…

What kinds of financial planner exist and how do I choose the right one?

There are many different kinds of financial planners — from life insurance brokers and real estate agents to lawyers, accountants, tax agents, property developers and bank tellers — and many of these professionals can legally call themselves financial planners. For everyday investors, choose an expert who will guide you toward long‑term financial success rather than someone who only steps in to fix a crisis. Look for recognised qualifications (see CFP below) and a planner whose services match your life stage and goals.

What is a Certified Financial Planner (CFP) and why is it important for investors?

The Financial Planning Association of Australia (FPA) is the professional body that assesses and awards the Certified Financial Planner (CFP) title, which it describes as the highest certification available to financial planners worldwide. For investors, a CFP credential indicates a planner has met rigorous standards of training and ethics, so it’s a useful marker when choosing trusted financial advice.

Can anyone legally call themselves a financial planner?

Yes — a large number of people in different professions can legally call themselves financial planners, including life insurance brokers, real estate agents, lawyers, accountants, tax agents, property developers and bank tellers. Because the title isn’t exclusive, it’s important to check qualifications, experience and professional membership when selecting a planner.

When should I see a financial counsellor instead of a financial planner?

If you’re in immediate financial trouble, a good first step is to see a financial counsellor — many are available free of charge through community organisations. Financial counsellors help with crisis management and budgeting, while financial planners typically provide longer‑term planning and investment advice. Both types of adviser are regulated by ASIC.

How should financial advice differ at different life stages?

Financial plans should be tailored to your life stage. Young adults (for example those with a HECS loan) should focus on developing good savings habits early and protecting income in case of illness or injury. Those mid‑career should avoid excess tax, maximise available benefits and ensure family protection with life, health and income protection insurance. In later years or retirement (the article notes often 20 years or more of retirement), you’ll need to generate enough income from savings and investments to maintain your quality of life and minimise tax in retirement.

What types of insurance should everyday investors consider to protect their income?

The article highlights protecting your income in case you can’t work due to illness or injury. Key protections to consider include income protection insurance and, if you have dependants, life and health insurance. These coverages help preserve your financial plan and family wellbeing if you’re unable to earn your usual income.

Where can I find trustworthy tools and resources to manage money and find a planner?

ASIC’s MoneySmart website (www.moneysmart.gov.au) offers tools and resources to learn about managing money and achieving financial goals. The Financial Planning Association of Australia (www.fpa.asn.au) also provides advice, resources and a facility to locate a qualified financial planner in your area.

How can I plan for retirement so I maintain my quality of life?

To maintain your quality of life in retirement, plan to generate enough income from your savings and investments to meet expenses and try to minimise the tax you pay in retirement so you have more to spend or save. Starting early, keeping a long‑term focus and seeking professional guidance tailored to your retirement horizon can help you reach those goals.