# Financial Advisors --- What SHOULD they be able to advise on?



## tech/a (7 May 2013)

I'm one of those who doesn't have a great deal of time for F/A's

I have a few friends who are F/A's and frankly there is only one of 3 who's advice I value.

I find most F/A's are hog tied by their dealer principal--they are no more than a glorified Managed Fund sales manager.
We have had lots of threads saying similar.

But what are the types of things you'd "Like" to know.
The sort of questions you think an F/A *should *be able to answer.
Not that your looking for an answer here!

Over the years mine have been---
When will I know its a good time to purchase Industrial Real estate?
What is the most effective way to develop for maximum return.
How is it best I structure my own Industrial property in my SMSF (Accounting Firm sorted that--F/A had blank look)
What are your thoughts on hedging my SMSF portfolio--what would you suggest.
What are your hints on risk management with regards to the market post GFC?
How much do I need to retire on and what is my best structure going forward (I'm at that age).

How do you see investment in commodities like gold and silver etc going forward and why good or bad.
If we have a prolonged period of stagnation what is your advice?
If we enter into an inflationary period what should I look for and how do I protect cash?

Just to mention a few.
Many Ive found answers myself through other means---but

Im interested in the questions others find F/As's *fall short on answering*.

I figure all should be capably answered by someone who's profession is Financial Advice.

I find generic questions their speciality---nitty gritty what its all about (in my view) questions draw a blank more often than not!

I've also started another thread in which I would welcome opinions and hope others may ask financial questions there looking for opinion as well.


----------



## CanOz (7 May 2013)

*Re: Financial Advisor's --- What SHOULD they be able to advise on?*

I'm not completely sure i get what your asking but one thing I've always wondered about is how do F/A / Planners answer the question "what can i expect for a max DD?"....Since they don't use quantifiable systems it must be a difficult question to answer, then again they likely don't get asked that question that often....only, "what is my potential return?".

CanOz


----------



## tech/a (7 May 2013)

*Re: Financial Advisor's --- What SHOULD they be able to advise on?*



CanOz said:


> *I'm not completely sure i get what your asking *but one thing I've always wondered about is how do F/A / Planners answer the question "what can i expect for a max DD?"....Since they don't use quantifiable systems it must be a difficult question to answer, then again they likely don't get asked that question that often....only, "what is my potential return?".
> 
> CanOz




I gave examples of some of my questions above.
I thought others would have similar questions and experiences.
I hope that clarifies for everyone.


----------



## Julia (7 May 2013)

*Re: Financial Advisor's --- What SHOULD they be able to advise on?*

I haven't met too many FAs who I'd regard as having the detailed expertise required to answer your sample questions.

If they're able to appropriately advise on tax and estate planning, how to structure your finances in order to perhaps get some Centrelink benefit in retirement etc, I reckon that's about all most of them are up for.

I'd reserve a special low regard for those working for banks where they're simply salespeople for the banks' own products.

A couple of FAs who post occasionally, viz Junior and Doobsy, have been good enough to offer their views where appropriate but have never touted for business.  I respect that much more than people who use the site to chase clients.
(sorry, tech/a if that's a diversion from your topic.)


----------



## tech/a (7 May 2013)

*Re: Financial Advisor's --- What SHOULD they be able to advise on?*



Julia said:


> I haven't met too many FAs who I'd regard as having the detailed expertise required to answer your sample questions.
> 
> If they're able to appropriately advise on tax and estate planning, how to structure your finances in order to perhaps get some Centrelink benefit in retirement etc, I reckon that's about all most of them are up for.
> 
> ...




Not at all.
If only for the highlighted section.
Bought a wry smile!


----------



## tech/a (8 May 2013)

*Re: Financial Advisor's --- What SHOULD they be able to advise on?*

Thought this relative to the thread.



http://www.professionalplanner.com....e=newsletter&utm_medium=email&utm_campaign=PP


----------



## Vixs (8 May 2013)

What should they be able to advise on?

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg146-published-26-September-2012.pdf/$file/rg146-published-26-September-2012.pdf

They should have a general understanding at the bare minimum of economic cycles, business cycles, where we stand in the world with interest and exchange rates, how our inflation levels are different to some of our trade partners and what that means for us, how the government and central bank monetary and fiscal policies will affect their lives and investments.

They should understand and be able to explain the roles played by market participants, markets with correlations to others and why they exist (US bond/equity relationship for example - ours isn't the same, our treasuries track US treasuries closer than they move with our equity markets), the behaviour and relationships of industry sectors.

An adviser armed with that minimal level of market and investment knowledge should be able to help you establish your goals and ensure that your needs are met.

They'll need establish where you are relative to your goals and how much risk you do or don't need to take to get there, what your capacity to take those risks are and if your tolerance to risks will allow you to meet your goals.

They should be able to identify the financial risks you face in the event of accident, illness, disability or death and demonstrate how that would affect your position. 
They'll be able to show you the consequences of: 

ignoring or retaining the risk (don't build assets, don't get insured)
reducing the risk (have access to assets or credit that would alleviate some of the impact) 
or transferring the risk (being appropriately and adequately insured)
They should be able to provide recommendations for cover that would transfer the risks and provide financial security. They should also be able to work with you on compromising level of cover for the premiums you can afford. If you don't think insurance is important after they've done that, that doesn't mean you don't need insurance, it just means they're a poor salesperson.

With your goals and risk appetite and protection taken into account, they should be able to produce, document and explain an investment strategy using cash savings, fixed interest, property, equity, managed funds and international versions of all of the above and strategies for utilising them. Savings plans, regular or lump sum investing, whether or not to use leverage and how to manage it, how your strategy will affect your tax position and if the effects on your tax make the strategy used ineffective then revisiting the strategy. They should be able to account for family plans, education, retirement goals.

They should be able to demonstrate the importance of properly structuring your borrowing and asset ownership, and either provide solutions or refer you to an expert that can. They should ensure your estate planning - wills, power of attorney, living wills, testamentary trusts or bloodline trusts etc, are put in place by a suitable solicitor and make sure that your estate planning supports your financial plan.

They'll have to do all this within a legislative framework that is excessively complex and designed at making sure the same morons who can't work out and add a 15% public holiday surcharge onto a bill themselves are able to understand what needs to happen, how it should happen, why it is a good idea, when it needs to be done and how much it is going to cost you and the adviser will be paid for doing so.

Every adviser should be able to do those things. That's RG146.

Experienced advisers and specialists should be able to help you navigate small business CGT retirement concessions, how to extract capital and profits from companies in the most cost effective way, how to manage employee share plans and company options, business insurance needs - buy/sell, key person and business expenses, the appropriateness of SMSFs and the pros and cons of utilising them, SMSF compliant investment strategies, compliance traps etc. 

Not every muppet can address these areas with enough knowledge and experience to look after your best interests, but sure, feel free to let the real estate agent tell you to buy a beat up house with your SMSF and fix it up - see how that works out for you.

What an adviser can't really advise on with any confidence is specific property purchases - property isn't a financial product, it isn't regulated the way financial products are and as such you're more open to being shafted by a bad deal if you make a poor choice of property. They might have a good idea of where the interest rate cycle is at, how you should structure your investment and personal loans and how and when they should be repaid. They should be able to explain the interest rate curve to you and tell you if and when it's worth considering fixing your loans or if it's a good idea. They might be able to help you avoid the mistake of paying down a fully deductible investment loan rather than keeping the extra repayment money in an offset account. They might be able to help you structure and manage portfolio loans or global borrowing limit loans. What they can't generally do is say yes you should or no you shouldn't purchase or develop a specific property - they can only show you how it will affect your financial position.

They also aren't accountants, and as such they can only offer you information relating to your position and the strategy being recommended in general. If you've got a complex financial situation you probably have an accountant and a good accountant and good adviser should be happy to work together to improve your position.

That's my opinion on what a financial adviser should be able to do. A lot of them aren't very good from what I've seen, but some of my teachers weren't very good when I was at school either. Some of the 'sandwich artists' at the local Subway aren't very good - hell, they can't even tell the difference between pepperoni and salami (THE PEPPERONI IS RED YOU IDIOT, WE GO THROUGH THIS EVERY WEEK). Some mechanics aren't very good and some doctors aren't as good as others. Why everyone expects to get consistently excellent advice from advisers and still complain about paying the good ones more is beyond me.

You get what you pay for.


----------



## Vixs (10 May 2013)

Sorry, didn't mean to kill a thread by providing information. 
I suppose attempting to portray advisers as anything more than bank aligned managed fund salesmen who are out to collect fees from your funds at your detriment is an uphill battle.


----------



## tech/a (10 May 2013)

Vixs said:


> Sorry, didn't mean to kill a thread by providing information.
> I suppose attempting to portray advisers as anything more than bank aligned managed fund salesmen who are out to collect fees from your funds at your detriment is an uphill battle.




No no
I've just had no time at all
Want to answer you in length.
Good post.
But wont be able to for a while
Away this weekend.


----------



## Vixs (10 May 2013)

tech/a said:


> No no
> I've just had no time at all
> Want to answer you in length.
> Good post.
> ...




Of course, it was a lengthy post - the intended audience was greater than just you though tech :

I tend to overshoot the forum post word quota and then the thread dies because noone can be bothered reading it


----------



## Julia (10 May 2013)

Vixs said:


> I tend to overshoot the forum post word quota and then the thread dies because noone can be bothered reading it



That doesn't apply to me, for one.  I find your contributions interesting and absolutely worth reading.
Perhaps more of us who react similarly should offer more +ve feedback?  
Just gets a bit 'off' saying "good post"  or  "+1" etc.


----------



## ROE (10 May 2013)

Vixs I dont use one, my good advisor is Mr Market mood swing each day....I like it when he is depress and advice others to sell stuff cheap ...but a very good post some people may find it useful....


----------



## jmoz (11 May 2013)

tech/a said:


> I'm one of those who doesn't have a great deal of time for F/A's
> 
> I have a few friends who are F/A's and frankly there is only one of 3 who's advice I value.
> 
> ...




i think what a lot of people don't recognise from up on their high horse is that financial advisers operate in an obsessively regulated and scrutinised industry. for a start those the first 3 questions you raise tech/a we are flat out not allowed to provide specific advice on. as in, if we did and ASIC came knocking, we could lose our licence to practice (with the potential exception of number 3, but that is skirting dangerously close to accountant only territory). as for the rest of the questions you raise, I would personally be happy to speak in GENERAL terms about them and the benefits and risks of each. specific, documented advice is a different story...

i often get the feel of a real 'champagne on a beer budget' attitude towards the regular bank/small IFA financial advisers. How much would you be prepared to pay for an SOA outlining everything you have asked for advice on above? I am telling you the behind the scenes needed to provide you with what you want is at least 60 hours work, as a conservative guess probably much more. So you've got the hourly rate of the planner to do the research, file notes and come up with the plan, the paraplanner to complete the plan, the CSO to get the file ready and complete any necessary paperwork, the PI premiums which would be through the roof with advice on hedging and precious metals, plus rent, bills etc etc that every business has. We're looking at $12-$15k to cover costs, not to mention the opportunity cost of appointments the adviser can't take because he or she is locked in their office working on your plan. and heaven forbid the poor bastard actually makes a profit on it right!

that isn't to say that there aren't financial advisers out there whose business model is set up to deal with what you have outlined and much more. I know a couple, and I can tell you that they don't want your business (nothing personal tech/a, it is a collective your. 

advisers are there for the 99%, and get hammered unfairly in a lot of cases. Tech/a, you have obviously spent hundreds if not thousands of hours of study, reading and learning financial markets and stock markets in particular. If you were an F1 mechanic, would you drop your car off at the local Toyota dealer for a service and then stand over them telling them how silly they are for not knowing how to work on an F1 engine? 

for a forum based on business and profits, there seems to be a certain naivete of the business realities of financial advice. The majority of (active, not including old legacy life insurance or corporate super etc) financial planning clients are very happy with their adviser and find a very high level of personal comfort and satisfaction from their relationship with them. Simple (aussiestockforum simple) advice does not make it bad advice in 99% of cases.

i hope this doesn't come across as too aggressive, it is certainly not meant that way! just passionate about it and happy to go in to bat for financial advice! 

cheers


----------



## jmoz (11 May 2013)

jmoz said:


> If you were an F1 mechanic, would you drop your car off at the local Toyota dealer for a service and then stand over them telling them how silly they are for not knowing how to work on an F1 engine?




probably not exactly the right analogy. Should be more like you want to buy an F1 car and then get pissed off that the local toyota dealership can't advise you on which one to buy and how to go about servicing it. that doesn't really work either but hopefully you guys get what i mean!


----------



## Garpal Gumnut (12 May 2013)

It is my firm opinion that Financial Advisers should be able to provide the following.

1. A big sign saying they are a financial adviser.

2. An appropriate sized canopy outside their office, providing neither shade nor respite from rain, but impressive and of the same hue as the person below.

2. A strategic position on a major thoroughfare in a city or large regional town.

3. Appropriate parking outside the building, one quarter filled with leased Audi Quattro's belonging to the muppets who work for them.

4. A front desk female of reasonable attractiveness between the age of 22 and 24, with a uniform of the same hue as the canopy.

5. Testimonials from muppet organisations who license Financial Advisers upon the wall behind said 22-24 year old female with a uniform of the same hue as the canopy outside the building in front of which are the Audi Quattros of the muppet workers.

6. Toilets with golden buttons and faucets, cleaned within a whisker of intensive care antibacterial sterility, preferably with a couch for muppet customers overcome by otherwise normal excretory actions.

7. A grave principal not yet ready for the grave, but not that far away from same.

6. Younger male and female advisers with the sniffles.

7. A broad plan for wealth accretion, such as any that are available from google.

8. A Golden Logo.

9. Muppet clients.

gg


----------

