Show me the value!
Cost is only an issue in the absence of value. Think about it – when you know you’re getting value do you question the price? Here’s another fact; money is difficult to earn but very easy to spend, so most of us will not hand over our hard earned dollars unless we feel we are getting something of value in return.
When it comes to financial advice, what is value? For some, it is paying somebody to give them investment advice so they feel they have a professional taking care of their investments. For others, it can be a strictly ‘reactive’ service whereby the “adviser” (and I use this term loosely in this example) is simply an implementer of whatever the client wants done. In my opinion, the real value of advice is far deeper and greater than this and it comes in two distinct forms – tangible and intangible value.
A valuable financial planner is one which provides you with multiple forms of ‘tangible’ value – this heavily depends on your personal situation but some examples may include tax savings, cheaper insurance premiums, more reliable or consistent investment returns or a better deal on your home loan. These benefits can be measured and a dollar figure can usually be applied to value them. In many cases the benefits will outweigh any fees associated with the advice but this is not always the case (which, believe it or not, is okay also, see ‘intangibles’ below).
Australians who receive advice are usually drawn to the ‘tangible’ benefits as they are easier to identify and measure. “My financial planner saved me $10,000 in Capital Gains Tax this year” is a far easier conversation to have with your friends compared to “my financial planner helps me sleep at night because I know they have everything under control for me and my family.” However, I would argue that the second statement is far more important and is worth just as much to most of the people I see (if not more) compared to the tax savings they may be achieving.
The ‘sleep-at-night’ factor and ‘peace-of-mind’ are two common examples of the ‘intangible’ benefits which good advice should also be providing. These benefits are more difficult to quantify but is a very common reason why many people employ the services of a professional. Think of a plumber, if you think hiring one to fix your bathroom is expensive try doing it yourself and getting it wrong – it can be far worse. Unfortunately, many investors overstate their financial capabilities and instead of paying for a professional would prefer to either do nothing or try and manage things themselves.
In addition, as much as a professional financial planner’s role is to help people make smart decisions with their money, it is also to eliminate the possibility of them making poor decisions. During the Global Financial Crisis I spoke with many people who wanted to sell their investments, get out of the market and avoid the risk. However, having discussed their objectives and revisited their strategy most decided against it and enjoyed the benefits of significant returns since. In the immediate aftermath, during late 2009 for example many of these clients enjoyed a 31% return. On a $500,000 portfolio a 31% return equates to growth of $155,000. So, in this example the decision not to sell in March 2009 earned a substantial amount of money.
Of course, these hypothetical scenarios are great and in reality everybody is exposed to different issues and situations. Ultimately, your financial planner should be providing you with value (tangible and intangible) which outweighs any fees you are paying. I challenge you to think about your own situation to determine which side of the discussion you fall on – are you getting value for money?
Chris Giaouris, CFP®
Chronos Private Wealth
Chris Giaouris, CFP®
Chronos Private Wealth
Fitzpatricks Financial, Australian Financial Services Licence (AFSL) 247429. http://www.chronosprivate.com.au/
“I believe financial planning is not solely about investments or strategies, but more importantly, it is about helping people make smart choices with their money so they can focus on things more important than money.”
I have been providing wealth management and holistic financial advice to like-minded clients since 2008. This was initially with a boutique firm called Heraud Harrison who were one of the founding firms that later merged to create the Shadforth Financial Group (SFG). I was fortunate enough to create a number of fantastic relationships with clients and colleagues alike, many of those still being in my life today. But in 2016 I decided to leave SFG to build my own boutique practise which would be (and still is) focussed on a client centric and evidence-based approach.
I co-founded Chronos as I wanted to create a fun and vibrant environment for our staff and clients alike. Sadly, for many Australians, planning for their future is something that either finds its way into the “too hard basket” or gets neglected as everybody is so time poor. My goal is to help clients find their ideal lives, whatever that may look like, whilst at the same time simplifying those things that the world loves to overcomplicate for us. Clearly that involves providing clients with advice but not to be forgotten is also providing clients with education – this is equally important in my view.
I hold a Bachelor of Commerce from Deakin University, am a Certified Financial Planner (CFP®) and member of the Financial Planning Association of Australia. CFP® is an internationally recognised mark and is currently the pre-eminent representation of professional Financial Advisors around the world. I am also a proud member and accredited advisor with the ‘RIAA’ or ‘Responsible Investment Association of Australasia’.
As we all know though, life isn’t just about money! I’m a passionate fan of most sports and love to live an active lifestyle, be that in the gym, on the golf course or futsal pitch. I’m also lucky enough to hear so many amazing travel stories from my clients so as you’d expect the travel bug is regularly spreading through my household. I’m always looking to plan that next adventure!
Information provided is in accordance with our disclaimer – users should ensure they read this disclaimer before continuing to use this site.