But bad, or even average advice can be a handbrake that holds you back. If you want to get ahead the smart way, you need to be able to spot the difference.
Based on the 5 per cent rule (you can read about it here), this amount of money would allow the average Australian to draw a retirement income between $11,900 and $13,500 annually.
This reflects a significant gap from the average income for a full-time worker of just over $100,000 p.a.
Even when you add back in the potential age pension of up to $27,000 p.a., this shows the average retirement income is around $40,000, or 40 per cent of the average income for someone in the workforce.
For me personally, the idea of working for decades just to be forced to take a 60 per cent pay cut doesn’t sound very appealing.
This gap is what good advice can help you close, and why it’s so important you get this right.
Advice isn’t just for people about to retire
In the past, financial advice was largely built for people who were about to retire - but times have changed.
Around a decade ago, financial advice for people in their 20s, 30s, and 40s was born.
And in the decade since there has been an increasing number of solutions that can help people in this space.
While traditional financial advice focuses on managing investments for people that have already built a significant amount of wealth, this financial advice helps people actually build their wealth.
Financial advice exists to solve problems
Ultimately, the only reason you’d want to see a financial adviser is to help you solve problems; paying too much tax, not saving enough, can’t afford your dream home, investments aren’t growing the way you’d like, or even as broad as that you aren’t making the progress you want getting ahead.
Sometimes people are acutely aware of the problems they’re facing, but other times they use a financial adviser to first diagnose a problem and then find a solution.
If you’re looking for an adviser, it’s important you understand that their real job is to help you solve problems - because if they can’t, there’s no point working with them.
This should be your first screen on the search for an adviser, can they help you find and ultimately solve financial problems or issues.
Financial advisers can help you save more money and invest in areas that can help you retire. (Source: Getty) ·Traceydee Photography via Getty Images
You should also be aware that it’s hard to be an expert in solving every single financial problem or challenge that exists, and that different groups of people will face different problems when it comes to their money.
For example, business owners might have a different set of problems to graduates new to the workforce.
A couple in their early 40s will likely have a different set of problems to a single person who has just started up in the workforce. And tech workers may have a different set of problems to an expat new to Australia trying to set up a future here.
Different financial advisers will tend to focus on working with different specific groups of people, and by working with lots of these types of people they can become experts in solving their problems.
If you’re chatting to an adviser and thinking about working with them, ask them about the people they typically work with and the problems they are experts in solving.
Understand where your adviser can help
You should also be aware that some advisers only offer advice in a limited number of areas.
For example, some advisers will only help with setting up insurance like life cover and income replacement, others only offer investment management or budgeting.
If you’re only looking for help with one specific area of your money, these solutions are worth looking into.
But if you’re looking for someone to look at your entire financial situation and help you figure out the best things for you to consider, you’ll want to find an adviser that covers it all.
When chatting to your potential adviser, ask them if their advice is limited or if it covers all bases.
Understand how they charge
There are a lot of different fee models run by financial advisers in Australia.
Some charge a percentage fee from any investments they look after for you.
Others will charge a fee based on whether you invest vs buy property vs save in cash.
Some get paid commissions when you set up new products, and charge a fixed-dollar fee regardless of whether or how you invest.
Firstly I need to call out that as an adviser myself I’m a little biassed here, because obviously I think the way we charge is the best way - which is why we do it this way.
I will also say there are lots of ‘ways to be right’ when it comes to advice, and there are great advisers that run each of the fee models I’ve mentioned above.
But my opinion is that charging a fixed, dollar based fee is the least conflicted way to charge.
That’s because under this method, you get charged the same fee regardless of what you choose to do with your money.
Whether you save, invest, buy property, or focus on super, the fee is the same - and this way the adviser can help you understand these options and choose the best one for you - without you wondering if they’re suggesting you go down a certain path just because it’s the one that will result in them getting paid the most.
Speak to your mates and do research
A good way to find an adviser that can help you is to chat to other people in a similar position to you.
If you have mates, family members or even colleagues, a good starting point can be to ask them what they’ve done and who they’re used to help with their financial advice.
This can also help you understand what to expect, which in turn will help you get more out of the financial advice process.
The wrap
Financial advice can help you fast-track your money goals, save and invest more, and get ahead faster.
Quality advice can also help you plan out your money so you can find the ideal balance between enjoying your lifestyle today and setting up your ideal future.
But not all advice is made the same, if you want to get the best results for your investment in these services, it’s crucial you choose the right adviser.
Given the importance of the decisions you’re making, and the financial impact attached to them, it’s worth taking the time to find the right adviser for you.
Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. Ben’s new book, Virgin Millionaire; the step-by-step guide to your first million and beyond is out now on Amazon | Audiobook.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.
