What is financial planning?


By Balki Balakrishnan

Melbourne : At some time or other you may have wondered what financial planning is all about, why do you need a financial plan, and how a financial advisor can assist you in creating wealth for your and your family. If you haven’t this article may inspire you to think along those lines.

Financial Planning is all about developing strategies to manage your financial affairs and achieve your financial goals in a systematic and professional manner – and the first step in the journey would be to get the right advice.

You could achieve your financial goals by yourself if you have the inclination, aptitude and most importantly the time. In our walk of life, we seek the expertise of various professionals such as Doctors, Accountants, Mortgage Brokers etc. We do this because a mistake could be costly. What we are doing by hiring professionals to manage certain tasks is that we are outsourcing that task to experts in the field. It is very similar to what businesses do – that is outsource non-core activities and concentrate on core activities, the tasks that you do well. A financial advisor is a trained professional who can assist you to create and protect wealth for your family.

Setting financial goals and achieving them are important because health and wealth are critical to prosperity. A survey of Yale University showed that only 3% of the students had written down their financial plans for the future. Twenty years later a follow up survey of the sane graduates showed that the assets of the 3% who had not written down their plan exceeded the combined assets of the 97% who had not demonstrating the need for a financial plan.


Why would you need a financial advisor? Finance is a complex subject. The government legislation, the dynamics of the economy and changes in your personal circumstances make it more complex. In a globalized world where the market never sleeps financial matters are becoming increasingly complex. For example the recent proposed changes to superannuation by the Australian government will have an impact on the financial future of many Australians. The monetary and fiscal policy changes create winners and losers in the market place on a daily basis. A good advisor with up-to-date education, training, experience, skills and the tools of trade can assist you to manage these challenges. Advisors are also trained to take a holistic view and advise you on wide range of financial matters to make that all the pieces fit together.

A good advisor can help you in myriad ways. They help you set your goals by a process of education, challenges and discussion. More importantly they will help you in avoiding expensive mistakes. The result is that you will feel in control of your future and life regardless of your current wealth.

The first step in an advice process is initial consultation where the advisor will talk to you about your financial goals, aspirations, concerns and your finances. Normally this initial consultation is free and you have no obligation to proceed. They will then put together a personalized plan based on the building blocks to create, manage and protect your wealth. The plan may include products and service as building blocks or the advice may be strategic in nature.

A financial plan is dynamic in nature. Therefore, you should plan for a constant ongoing review to keep it relevant and make sure that your goals are achieved in an orderly fashion over a period of time. The advisor will review the performance against the plan periodically and make changes to finesse the plan if required.
A financial advisor could advice you on many financial matters including Budgeting and savings, tracking of budgets, cash flow analysis, investing to create wealth, wealth protection, funding children education, superannuation including SMSF, pre and post retirement planning, and age pension to name a few. What really happens when you engage the services of a financial advisor is that you are acquiring a personal financial controller for yourself and your family.

A recent ANZ survey on adult financial literacy and self-efficacy (self-belief in ability to change one’s financial situation) mentions “Both women and men with higher levels of financial self-efficacy were more likely to have investments in shares, managed investments and property and to have obtained advice from a financial planner in the last 12 months. (Italics and highlights are mine).” (Source: (ANZ Survey of Adult Financial Literacy in Australia May 2014)

So, if you are interested in taking control of your financial future by making the right decisions with your money, then good financial advice can help. After all, families with strong financial foundation create a strong community and as a result a stronger country.

PHOTO CREDIT: https://seeya.com/
Source: South Asia Times, October 2016 issue.

Neeraj Nanda

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