Ask an Expert for Financial Advice

Ask an Expert for Financial Advice

Financial Planning Association (FPA) helps Australians take the first step in controlling their financial situation and planning financially for the future. The Good Advice website explains that "the best financial advice comes from a professional financial planner who is a member of the Financial Planning Association (FPA)."

The Financial Planning Association of Australia (FPA) is the peak professional body for financial planning in Australia. It has a network of 31 Chapters across the country, which provides business and professional development activities for more than 12,000 members. FPA practitioner members manage the financial affairs of more than 5 million Australians whose investments are valued at $630 billion. CFP® and Certified Financial Planner™ are certification marks owned outside the US by the Financial Planning Standards Board Ltd (FPSB). Financial Planning Association of Australia Limited is the marks licensing authority for the CFP marks in Australia, through agreement with FPSB.

Invest in the right advice with Financial Planning Association's (FPA) online community initiative at www.goodadvice.com.au

Interview with Julian Place

Julian Place is the FPA (Financial Planning Association) Melbourne Chapter Chair.

Can you explain what a Financial Planner does?

Julian Place: A Financial Planner provides advice as the name suggests to your whole financial life, which encompasses not just investments or superannuation but the way you budget, your debt position, the way you receive money in terms of salary packaging and all those sorts of things. A Financial Planner also works out the arrangement of what happens with your money in the event that you become ill or unable to work, or indeed if you die. In every aspect of your life a Financial Planner can help including; how you earn money, how you leave money, how you invest money and how you spend your money. In all those different areas, people are in different tax brackets, obviously our life spans are uncertain but everybody has various attitudes in terms of their comfort with vitality and risk as well as expenditure and lifestyle. You need a Financial Planner to assist you in tailoring all those aspects of your life to function well and ensure that your money allows you to live the sort of lifestyle that you like.


Why is it a smart strategy for Australians to use a Financial Planner?

Julian Place: In all areas of your life you want to put your best foot forward and you can best do that when you are well informed and to be well informed you need to seek expert advice.


How much does a Financial Planner cost?

Julian Place: It really depends on the level of advice that you want or need. If it is a very straight forward situation, particularly younger in life when you, potentially, don't have debts or families or large financial commitments, advice could be pretty straightforward. For those running their own business and self-managed superannuation and family trusts, those quite complex arrangements, advice can cost quite a bit more.

A typical client, if there is such a thing, a lot of firms, I know, offer a standard advice or initial financial planning fee of somewhere between $2,000 and $2,500. There is no set range, in some cases you get what you pay for.


Before choosing a Financial Planner how can you be sure they are the right planner for you?

Julian Place: Firstly you want to make sure your Financial Planner is an expert in the areas that they are giving advice in and you also want to make sure that they are behaving ethically in the provision of advice and making sure that it is right for you and not right for them. SPA Financial Planners or CFT Financial Planners who are members of the Australian Financial Planning Association must abide by a code of ethics and professionalism. The CFT designation is a globally recognised as the highest designation you can have as a Financial Planner. If I was seeking advice, for myself, I would be looking for a CFT certified Financial Planner who was a member of SPA.

Once you have found someone, then, it is a case of talking to the planner and finding out about their typical client and whether you fit into that demographic, not that, that is a necessity. Although, it is good for the clients that the Financial Planner has expertise in the area you are seeking advice for.


Can you provide a case study, to show how other Australians benefited from advice from a Financial Planner?

Julian Place: Last week a younger client, this is an example that proves you don't have to be extremely wealthy to have value and advice in using a Financial Planner. The client had a smallish managed investment portfolio, around $100,000 or so, and she had just purchased a flat and what we were able to do was give her some advice on using her investments to basically reduce her mortgage. She was able to take out an investment loan to purchase a new investment portfolio and by doing that made about $7,000 of that debt tax deductible, which saved her $3,500 in tax. That sort of advice covers their advice fee, twice over. Although, this is only part of the bigger puzzle, that I talked about earlier.

We also looked at her investment portfolio, being a younger person and having a longer investment time horizon time before super she had a reasonably low level of exposure to growth assets of shares, so we reviewed that and increased the exposure to shares a little bit which over the long time should provide a better return than a more conservatively invested option, if history is any guide. We made some small adjustments and reviewed her whole position, in terms of estate planning and insurance as she is a Barrister, which is why we talked about insurance and what would happen if she was to stop work, protecting her income was a very important strategy.

Money spent on advice, is money well spent.


It is said that the younger generations are spending more than their parents, why do you think this is?

Julian Place: I sound like an old person, when I say this, I am 36, but the younger generations want their first house to be a new house, not an existing dwelling but a new house and it has to be that way. When I got my first home, I sat on the floor, for two years, before we owned chairs! We sat on the floor to eat our dinner, every night, for two years.


What tips can you provide for someone who is struggling to pay off their debts?

Julian Place: Debt is all about comparing what is going in to what is going out. A budget is a very good place to start, when I talk about a budget with clients I don't necessarily mean 'tightening the belt' I mean just understanding where your money goes, it is good to keep a list, even if it is just over a week or a month, keep a list of everything you spent and then really look at where it is all going. A lot of clients tell me "I earn $50,000 and my expenses are $40,000," and I say "ok, you've got $10,000 to save" and they say "No…" Understanding where your money goes is the first step and then you've got to look at what is really important to you in terms of your expenditure and what is discretionally. You have to balance your own books, basically.


What is your number one piece of advice to Australians who want to pay off their mortgages faster?

Julian Place: One way not to go about paying off debt is to take out more debt. It sounds so elementary but so many people have two and three and even four credit cards.

Another thing is to consolidate debt, particularly if you do have a mortgage, typically your mortgage loan has the lowest interest rate, so if you can re-finance your mortgage to allow you to incorporate your car loans, personal loans and credit card debt with your mortgage. Also, have at least the minimum repayment coming straight from your pay packet, to your mortgage, so at least you're ahead there.

One other thing, when clients are purchasing a new property or re-financing it is often a good idea to borrow just a little bit more than you need to fund the purchase or the re-finance and use that little bit more, it might be $10,000 or $20,000 just to put that lump sum straight back on the mortgage on day one, that way you're ahead from day one. If the worst happens, or you need some additional cash in the short term you have a safety net there that you can draw out if needed and it means you are not going to run into trouble with banks and things later on.


Do you have any tips for the end-of-financial-year, in terms of maximising our financial position?

Sure, you can make a personal contribution or a co-contribution, or if you have spouses that are not working or earning a small amount things like spouse contribution to get a tax deduction.

There are some other strategies in terms of deferring selling down non-superannuation investments; for example if you're going to sell shares, if that is the thing you decided to do, then you may be well advised to defer this until after 30th of June because of any capital gains attached. By selling your shares, after the 30th of June you defer the realisation and the tax is only payable in your tax return in the following year. We often say 'tax deferred is tax saved' because you have the money in your pocket, in the meantime, where you can invest it or save it or pay off debt.

If you have managed investments often they will pay distribution income on the 1st of July or 30th of June, if you were to purchase a managed investment, mid June, they would return a lot of that capital as income on 30th of June and then that is income that is taxable in your tax return. If you defer purchasing that investment until after 30th of June, then you don't have that income on your tax return. There are a variety of smart things you can do to improve your position.

It is important to keep in mind all your normal deductions and keep all of your receipts and all those sorts of tips. Just understand what you can and can't claim in terms of work expenses.


Interview by Brooke Hunter