FINANCE:What does a financial advisor do?



Melbourne: In the last two articles in this newspaper we explored what financial planning is and how to identify a good financial advisor. In this article, we will see briefly what a financial planner does. Most ordinary Australians do not engage an advisor because of this misconception that financial advice is only for the wealthy. This could not be far from the truth. In fact, professional advice is essential to building and retain wealth.

In a nutshell, a financial advice involves setting financial goals, assessing current financial status and then designing and putting in practice a process to achieve the goals.

The first and most important step in the advice process is to set your financial goals. The financial advisor assists you in this by going through a process of education, challenges, and discussion with you. An advisor will bring the education, training, skills, tools and the experience to work with you in discovering your financial and personal goals, desires, concerns, and preferences. For example, your financial goal may be to buy an investment property, fund your child’s education or generate a passive income from some point in the future to name a few.

The financial advisor enables you to understand what steps are required in meeting your stated goals. More importantly, the financial advisor will also educate you to dispel any unrealistic expectations and misconceptions you may have. This educative process may be about simple topics such as budgeting and savings or it could be about understanding complex insurance, investment, taxation and estate planning matters.


Having set your goals, the next step in the advice process is to understand your current financial health. The financial advisor is equipped with the right tools to collect this information in a structured way such that all the necessary details to design a good plan are collected. You should be mindful that ultimately a good plan requires comprehensive and accurate data about your current financial affairs.

The financial advisor will then proceed with researching potential solutions and propose a financial plan for discussion. The presentation of this discussion paper is an important step in the process and not many financial advisors follow this step. Broadly, this proposal document will contain your current financial situation, your goals that are in scope as agreed, solutions that would meet each of your goals, advantages, and disadvantages of the proposed solutions and what you should be aware of if you proceed with the solutions. A good financial advisor will propose more than one strategy and product/service solution that could assist you in meeting your goals.

The proposal document is then presented to you for further discussion. At the end of the presentation, you should have a good idea of what the proposed strategies are, how they are going to meet your goals, the time frame in which each goal will be achieved, the cost of proposed solutions and the likely fees you will be paying the advisor initially and on an ongoing basis. A good financial advisor will offer you the opportunity to revise the goals, add or remove advice topics in scope and present you with a revised set of proposals. This iterative process will continue until you agree with the proposed solution. A good financial advisor will not charge you any fees until this agreement is reached. This is because a good financial advisor will strive to demonstrate the value in his/her proposition to your satisfaction.

The next step in the process is the preparation and presentation of Statement of Advice (SoA) which is a formal document and have strict rules in regards to its contents. This document will detail the specific products and/or services recommended for implementation. This document is presented to you formally and your consent is obtained to proceed with the implementation of the recommendations. A copy of the Statement of Advice is given to you for your records and follow up.

Financial planning is a dynamic process and your financial development needs to be regularly reviewed against the financial plan. This is because the changes in economic factors, government legislations, and your personal circumstances will have an impact on the proposed plan. The effects of these changes have to be monitored, assessed and managed to make sure that your goals are on track.

Depending on their qualifications, experience and other factors a financial advisor could advise you on many topics such as Budgeting and Cash Flow Management, Debt Management, Personal Risk Insurance, Investment Planning, Superannuation including Self-managed Super Fund (SMSF), Tax Planning, Pre-retirement & Retirement Planning, Centrelink, Aged Care, Estate Planning and strategic advice to create wealth. A financial advisor cold also offers mortgage broking services if they are qualified to do so.

Most of the above advice topics are interrelated and therefore a financial advisor will take a holistic approach in designing a solution to create and protect wealth for you. You will find that going through a financial advice process is a rewarding experience as many have found out.

The trustee of COMMUNITY FINANCIAL SERVICES Unit Trust ACN 155 048 132 is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, Community Financial Services Pty Ltd and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us at 0419 506 560 if you want more information.


Neeraj Nanda

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