by Melinda Houghton | May 21, 2020 | Financial Advice
The end of financial year is approaching fast, and this year many people have things to deal with they may not have dealt with before. It is vital that you get the service providers you need sorted, especially this year as Financial Planners, Accountants and Financial Counsellors are frantically busy dealing with the normal end of financial year challenges, as well as the extra work caused by the Pandemic.
Regardless of Covid 19, June 30 will arrive and once that date hits, the chances for many tax minimisation strategies will be gone. Many planners and accountants will not be taking on new clients close to June 30 this year, as they are just too busy with their existing clients, and there are over 5,000 less financial advisers this year than last year.
It is common on social media to see someone asking for recommendations for a financial adviser, and then people very helpfully making their suggestions.
However, quite often the referred person or company is actually a mortgage broker or accountant, and frequently the person asking for the referral doesn’t know exactly what they need either. This is not surprising, considering there can often be quite a bit of crossover in these professions. Some companies or individuals perform more than one role, and many well-meaning referrers do not know exactly who is supposed to do what anyway.
Please note that there are strict licensing rules around the professions, however just because a practice mainly does one role, it doesn’t mean they don’t have multiple licenses and professions in their practice, and quite often with individuals having multiple licenses.
So here is my breakdown for you.
Financial Counsellor
An assistance service for people who are in financial difficulty. Mostly government funded and generally accessed via local organisations and agencies. A financial counsellor will provide information, advice and advocacy to people in financial difficulty, often related to debt and falling behind on bill payments and debt payments.
They will usually help with prioritising debts, developing budgets, accessing grants or concessions, negotiating with creditors, access dispute resolution services, and understanding of rights and access to legal help if necessary.
www.financialcounsellingaustralia.org.au
At different times there can be different waiting times to see a financial counsellor, so you should get in touch as soon as you think you might need this service, and not leave it to the last minute.
Financial Adviser or Financial Planner
This is the service for people who are not in any real financial difficulty. You may be doing really well, or believe you could be doing really well if you knew more. You do not have to be rich, and you do not have to be organised before you see a financial adviser. However when you find a good adviser, the specialist knowledge that that they have can usually make people way better off over the long term, even after you pay fees.
A financial adviser can usually help you with budgeting and cash flow, investing and superannuation, debt reduction strategies, taxation minimisation strategies, personal insurance, Centrelink planning, retirement planning and many other areas. Some financial advisers focus on business planning as well as personal financial planning, and some focus mostly on Insurance strategies.
You pay fees to a financial adviser, they do not get paid or subsidised by the Government, and they do not get kickbacks from product providers anymore (some did in the past). Your fees should pay for services that help you to become more financially literate, make the most of your financial opportunities, and keep you on track. You should see value in your improved financial position after receiving advice, and also in your confidence. Most financial advisers will provide you with an ongoing service option so you keep up to date with all changes and opportunities, and have someone to call on if things go wrong.
Some financial advisers are also Mortgage Brokers and/or Accountants, however remember that all financial advice must be provided in writing.
Mortgage Broker
Most mortgage brokers assist their customers to find and apply for appropriate home loans, and some brokers will also assist with business property finance options. Some also help with vehicle and equipment finance. They have expert knowledge of what finance providers need you to have in place prior to approving loans and should provide you with choices once they establish your options based on your personal situation and preferences. Whilst budgeting is now a large part of mortgage broking and most brokers help with this, it is generally a secondary role rather than the primary function of what they do.
There is an increasing trend for mortgage brokers to charge a “fee for service” to the client, however it is still common for brokers to be paid by the financial service provider of the loan they help you to apply for. Most brokers focus solely on Mortgage Broking, however there are some who are also licensed to provide financial planning services.
Accountant
Accountants have a different role again, being predominately focused on taxation matters. However this covers a broad range of services, including tax return preparation and lodgement for everyday employees, business taxation, business structure planning and advice, tax minimisation advice for businesses, and business planning and management services, Self-managed Superannuation Fund taxation and auditing services, and setting up and assisting with Trusts and Companies. This is not an exhaustive list, and other services are also offered by Accountants.
Accountants usually charge an invoiced fee for the services they provide, and are paid by their clients, generally in direct relation to the amount of work they do for that client. Some Accountants also charge businesses a monthly flat fee that incorporates all the services they provide.
Whilst there can be crossover with Accountants also being Financial Advisers or Mortgage Brokers – the services each provide are different, and in general Accountants cannot provide Financial Product advice or Investment advice.
So which do you need?
That depends on the services you need. By the time most individuals get to adulthood they will need at least one or all of these services at some time. Ideally the services work together covering their own areas of expertise, but complementing each other with strategic information that assists you to get the most out of each service. You should ask each provider what areas they specialise in, and find someone who is best at the area of advice you need.
There are good and bad service providers in every profession, and when financial rules and regulations change so often it can be hard to know if you have a good provider or not.
If you need help with working out which service you need, how they all work, and whether you are getting good value for your services, contact Insider Out – Understand and Trust your Advice.
Melinda Houghton
Adv Dip FS (FP)
Insider Out – Understand and Trust your Advice
0400 533 865
www.insider-out./com.au
www.facebook.com/InsiderOutMel
This information may be regarded as general. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.
I am no longer authorised to provide financial advice. If you wish to receive financial advice you must contact an authorised provider.
https://www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register
by Melinda Houghton | May 5, 2020 | Financial Advice, Investments
Let’s start with the good news, Shell petrol discounts provided by Coles dockets have almost doubled in value, even though they remain at 4c per litre.
4c per litre when fuel is $1.50 per litre is approximately a 2.67% discount, when fuel is $0.80 per litre the discount is now 5%. Sounds great right?
Now what about the big banks? They are being very helpful right now, aren’t they?
Banks are offering all kinds of “assistance” with your home loans and credit cards right now.
CBA sent an email very kindly telling customers that if they were ahead on their payments or paying more than the minimum, they could reduce their repayments. That is helpful, even though most people know that.
Then a short time later they sent another one saying “we’ll be automatically reducing eligible home loan direct debit repayment amounts to the current minimum”. NOT you can, or if you would like to opt in – “WE’LL BE AUTOMATICALLY……”
So, in order to maintain your existing position, you must actually use your time and energy to take action.
There is magic in the financial world, hiding under the boring name of “compound interest”. Consumers are having to make difficult choices about which magic to use, good magic or bad magic, and when there is so much to cope with, this is a confusing burden.
As you have no doubt heard already, taking funds out of super is reducing the power available from good magic, by this seemingly small amount ($10,000) reducing some people’s retirement savings by over $100,000.
In a similar way, we are empowering bad magic by not paying every cent possible off your credit card and to a lesser extent right now due to low interest rates, your home loan.
The power of paying extra off debt has been promoted by financial wizards (financial planners, accountants, financial counsellors et al) for many years. However it works in reverse when the banks are charging extremely high interest rates on credit cards. NAB is charging 19.99% pa on some credit card options right now, and whilst the cash rate has fallen drastically to 0.25% pa, credit card interest rates have mostly remained unchanged.
The NAB have reduced their monthly minimum payment on credit card debt to 0.5% of the balance. So, the remaining amount of interest that you don’t pay is accruing compound interest and working against you, building a higher and higher debt.
For example, on a balance of around $15,000 at 19.99% pa paying only 2% of the balance will take approximately 67 years and cost approximately $67,000 in interest. Increasing the amount paid to 5% will save around 65 years and around $63,000 in interest. But the new minimum could result in paying interest of more than $660,605,000 in interest and take more than 83 years to pay off (if ever).
The issue here is that the banks fully understand human behaviour and are relying on inertia and the lack of financial literacy of consumers to help recover their losses in other areas including remediation costs for financial advice failures.
People are busy, their inboxes are full, they think they have a solution to avoiding late fees by paying the minimum amount as a pre-set amount. Then the bank changes the automatic minimum amount without their input.
This inertia strategy is also used by the banks to pay minimum interest on their term deposits.
Of course, people can pay more on their credit cards, however many won’t notice it, many won’t change it, and many don’t understand just how wicked this is.
Personally, I would rather get a job in the coal mines or sell a kidney than pay less than the usual minimum payment if I had a credit card debt.
If the bank wants to “Help in any way they can” as stated on their email, they could be reducing interest rates or fees on credit, changing consumers to the lowest rate cards available if they carry a balance, or refer people to financial counsellors if they can’t pay their standard minimum payments.
Many consumers are furious they now must take action to get back to the payment amounts they personally set. Giving people options to reduce payments in certain circumstances is very helpful and deserves recognition.
What they are doing now though deserves a different kind of recognition.
How do you know where to prioritise your payments when times are tough and things are so confusing? You might need help (financial counsellor) or advice (financial planner).
Use the power of compound interest to your advantage and it is like waving a magic wand.
Melinda Houghton
Adv. Dip FS (FP)
Insider Out – Understand and Trust your Advice
This information may be regarded as general. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.
I am no longer authorised to provide financial advice. If you wish to receive financial advice you must contact an authorised provider.
https://www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register
by Melinda Houghton | Apr 9, 2020 | Financial Advice, Investments, Superannuation
Financial issues arising from COVID-19 are arguably one of the most confusing, drastic, and important situations consumers of all types have had to encounter in our lifetime.
You would think that a Financial Adviser would be one of the first points of call for many consumers who need help, with qualified, authorised, and experienced financial experts being the obvious solution to assist many who find themselves in unchartered territory.
Whilst not everyone will need full advice, and certainly not everyone can afford it due to legislative barriers and compliance making advice expensive to provide; you would think that all the work our Regulator and Legislators have done to improve the quality of advice and make sure advisers act in the clients best interests would mean they are directing appropriate clients to a financial adviser, right?
You would be wrong I am afraid.
ASIC’s moneysmart website has a new section called “COVID-19 making financial decisions – Steps to look after your self and your money” https://moneysmart.gov.au/covid-19. This site has a lot of financial information and answers a lot of questions that will assist a large number of people who need information, and ASIC should be applauded on getting this information up and available quickly.
On the main moneysmart website there are links to finding financial advisers in a couple of the sections (e.g. Tools and resources, and Plan for your future) with some excellent information and links.
However, there is no obvious section to refer people to financial advice in the COVID-19 section with any kind of list of who or what questions or problems would be best served by a financial adviser. I feel that many people would be clicking straight to this section in the current environment especially as it is the first link to click on with a “start here” button.
There is a front-and-centre reference to financial counsellors, which is highly appropriate, including a list of “What financial counsellors do”. However, to find a reference to seeking financial advice, I had to click numerous times, and go to the very bottom of the SMSF section to see a section that mentioned financial advice, which as per below has a focus on the fees being charged.
Then, to make the issue even cloudier, apparently ASIC believes that it is okay to say you can get “Free Financial Advice” with then a reference to factual information. See extracts from the website below:
Getting the right financial advice
- Make sure your financial adviser has an Australian financial services (AFS) licence
or is an authorised representative. Check their qualifications on the Financial Advisers Register.
- Decide what you want from the advice. Do you want help with investing money, budgeting or planning for retirement?
- Read your adviser’s Financial Services Guide to learn about their fees and services, and how they deal with complaints.
- Compare the fees charged by different advisers, to make sure you’re getting a good deal.
- Be careful about how much access your adviser has to your investment accounts.
- Talk to your adviser if you’re unhappy with their advice.
Free financial advice
If you’re looking for factual information about investment products and strategies, or want to do some research before you see a financial adviser, there are some good free and low cost options around.
We have useful information and tools to help you plan for retirement and understand how investing works, including:
- Retirement planner — calculate what income you are likely to have from super and the Age Pension when you retire, including contributions, investment options and fees.
- Superannuation calculator — work out how much super you’ll have when you retire.
- How to invest — learn about developing an investing plan, choosing investments and borrowing to invest.
You can also try:
- Financial Information Service — attend free Australian Government seminars on topics including managing your money, reducing your mortgage, investing and superannuation.
- Australian Securities Exchange (ASX) — visit the education centre for information for first-time investors, articles and online seminars.
- Your super fund — get factual information about investment and insurance options, contributions and consolidating your funds.
- Banks, credit unions and building societies — check their websites for retirement calculators and other factual information.
If your main goal is to save, see savings accounts, term deposits and our savings goal calculator.
https://moneysmart.gov.au/financial-advice
Since I changed from the Adviser side of the fence to the Consumer side, I have spent a lot of time explaining to consumers what advice is, what the advantages are, what the costs are, and why the costs are higher than many expect, however are likely to pay for themselves with the provision of quality financial advice.
Surely our Regulator’s main financial information website could do the same?
I have not yet had an enquiry to Insider Out where I have said “advice is not worth it, you should just go to the ASIC Moneysmart website for ‘free advice’”. This is mostly because people contacting me have a need for a solution that requires personal advice, however some people checking out moneysmart will also have this need.
Existing advice clients should know they can talk to their adviser as their first point of call. But wouldn’t it be great if the regulator was directing some people (where appropriate) away from the overloaded government services to Australia’s experts in financial matters in this crisis?
Some people will be much better off with advice in this drastic climate. If you need assistance to help decide if you are one of those people, please get in touch.
Melinda Houghton
Adv Dip FS (FP)
Insider Out – Understand and Trust your Advice
0400 533 865
www.insider-out./com.au
www.facebook.com/InsiderOutMel
This information may be regarded as general. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.
I am no longer authorised to provide financial advice. If you wish to receive financial advice you must contact an authorised provider.
https://www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register
by Melinda Houghton | Apr 1, 2020 | Financial Advice, Investments, Superannuation
Bit of a horrible disruption this virus thing isn’t it?
Who would have thought?
In my lifetime there have been plenty of disruptions. But this one has got to take the cake.
Has my life changed dramatically? Not really, I already work at home and avoid crowds. I have toilet paper from “Who Gives a Crap” and have done for years. I have a few more groceries in my cupboard, but only about a week or so worth.
I am not sick (at time of writing) and my elderly parents are (relatively) safely isolated in their home in a regional area with phone check-ins and deliveries of things they are missing out on (eggs currently) dropped at their doorstep. My (adult) kids are as safe as possible.
Having said that, it also seems as though everything has changed.
The air; whilst cleaner now, is thick with tension. The stories of hardship and loss are heartbreaking. Anxiety is hitting people it never hit before, and for those who live with it regularly, it is at a peak like Everest. The new and unknown are dominating forces. We are missing our friends.
But familiarly we are back to the financial conversations we had during the GFC.
“This time is different”
“Why didn’t the super funds sell before the markets dropped?”
“Should I sell now to protect from further losses?”
“I can buy back in when things are looking better, right?”
And one we didn’t have during the GFC – “Should I take my $10,000 or $20,000 out of Super?”
The amount of Government Stimulus is breathtaking. Centrelink is busier than it has ever been. The options are complicated. The rules are changing. Confusion is the dominant emotion now after anxiety.
People are grateful they have jobs to go to, and jealous that others are getting a break both at the same time. People are jealous of the people with jobs, and wish they didn’t have to stay home.
Emotions are raging, and everyone is struggling. So much uncertainty is not good for us, no wonder people are panicking.
But some things are guaranteed to happen. The health experts say that we will come to an end of this current health crisis. No-one is certain when, or exactly how, but they all agree it will end.
And financial experts are saying that the markets will recover. No one is certain when, or exactly how, but they all agree it will happen.
So, whilst this pandemic is unprecedented and horrifying, in financial terms we can look at history and see what has happened in the past:
• There are going to be some financial tragedies. We will lose company names that have been around for decades.
• We will have companies that exist now that will thrive and prosper, by offering goods and services and ways of servicing that are of most need.
• New businesses will rise to meet unforeseen opportunities and challenges.
• We will have to support people who are hit the hardest with welfare, stimulus, and a lot of understanding and care.
• The best of us will stand tall and help people out, the worst of us will scam, rob and rip people off.
Those who survive and come out the other side in the best financial positions will not just be the ones who were the richest at the start, they will be the ones who use common sense, listen to educated opinions for information, and who stay calm and in control of everything they can.
Budgets, savings, cash-flow management, research, acceptance of the situation, using any stimulus wisely, reducing expenses wherever possible, increasing income wherever possible, remembering every dollar counts, monitoring debt, and consulting experts will be paramount to moving forward after this is over.
For superannuation, getting good advice on what you should do is vital right now.
And by good advice I don’t mean agreeing with mates on social media that “it has all gone to pot and I could do it better”, then selling down and opening a Self-Managed Super Fund with a term deposit in it (“but just for now”) without understanding the complexity and costs.
I mean contacting your financial adviser or engaging with one if you don’t have one. Having sensible conversations that take your own situation into consideration. Listening to calm advice and only selling down if your assets are poor quality not because you are freaking out. Considering adding funds (if possible) while markets are low and with the best possible tax option for your situation.
Should you take out the $10,000 or $20,000?
Who knows? This is going to be a very personal decision and should only be done if really needed. But if it is really needed, then perhaps? A financial adviser can tell you, but your neighbour, social media, government and your emotions and anxiety shouldn’t.
Not everyone will qualify to withdraw. In ten years’ time it will be interesting to see people in similar positions now (e.g. super balances, jobs, family situation) who do act and those who don’t. I expect the difference will be significant.
Here is what I do know for sure:
• I was a financial adviser during the GFC. The clients who were invested appropriately and held their ground still had long-term average returns as expected and projected.
• No-one can accurately predict the top or bottom of the market, but markets will come back up at some stage. It may be sudden and dramatic.
• Everyone’s situation will be different and have different challenges, solutions and requirements.
• People with good financial advice are more financially relaxed, less likely to make poor financial choices, and have someone to call on when in doubt.
• You need to make good decisions to be one of those who can thrive after this ends.
Get the support you need in your personal life, and get the support you need in your financial world. It is vital that as soon as you can get your anxiety to a manageable level that you be sensible and deal with what is in front of you. Acknowledge that this new reality is really, really hard.
But life will go on, and this will end one day. Your actions now are vital. Contact me if you need help with the financial side.
Best of luck with your situation, and using the new sign off of our times, Stay Safe!
Melinda Houghton
Adv Dip FS (FP)
Insider Out – Understand and Trust your Advice
0400 533 865
www.insider-out./com.au
www.facebook.com/InsiderOutMel
This information may be regarded as general. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.
I am no longer authorised to provide financial advice. If you wish to receive financial advice you must contact an authorised provider.
https://www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register
by Melinda Houghton | Mar 5, 2020 | Financial Advice
Wow, just wow right?
Who would have thought that with everything going on in the world, people would be threatening violence over trying to buy bulk toilet rolls and for no real reason?
Social media does have a lot to answer for here, but so does regular media, human nature, our education system, and a relatively new phenomenon called “The Troll”.
This morning I woke up to the toilet paper debacle continuing (sigh) but also saw a post on a local facebook group that said Westpac was closing people’s bank accounts as they had gone into liquidation. The facebook post said people should be going down to the bank and taking their money out urgently. Seriously?
With my financial education and experience it was obviously somebody trying to get their kicks by starting a run on the banks. However for some people this would have caused fear and potentially panic. The people who don’t know all the details about our banking system and how safe it is in comparison to some other parts of the world, and the people who don’t have much and are therefore terrified to lose it (amongst others).
People had sensibly responded that in Australia banks have high levels of reserves, are highly regulated, and the likelihood of one of the major banks going into “liquidation” was virtually impossible. Seriously? What are they liquidating? The pens people steal?
Another person with a sense of humour suggested that they should definitely be taking their money out to buy toilet paper; everyone knows the best way to get rich is to hoard toilet paper right?
But the Troll who posted the fake news had an answer for everything. “Banks went under during the GFC, don’t be the one who doesn’t listen and loses all their money, better to be safe than sorry, this Corona Virus is unprecented, it is causing more chaos than ‘they’ are telling us about” and so on.
And on this closed facebook group with over 25,000 members people were responding. I am betting the Troll may have noted everyone who said they were taking their cash out and might be paying a visit with a weapon in order to profit from their efforts. Now that is something to actually worry about.
If only these Trolls would use their power for good instead of evil, imagine what they could achieve?
DON’T FREAK OUT!
My dance teacher used to tell me this when we got a hard routine correct. We used to try and try and try and then suddenly stop when we did it instead of moving forward because we were so surprised. It always sticks with me when things are crazy. But take note:
• We produce toilet paper in Australia, we will be fine.
• We have high levels of health care, a reasonably competent Government (ok a bit of a stretch, but in comparison to some places still true).
• Even if you need to isolate yourself (statistically unlikely), things can be dropped on your doorstep for you.
I was an adviser during the Global Financial Crisis. The panic was real and to a large degree justified. However people were saying “This one is different, markets will never recover, the world is ending this time”. And they were wrong.
The people who lost money were the people who listened to the hype and panicked and sold assets, not the people who knew their risks, listened to the people with genuine knowledge, and who rode out the market downturn.
In this crisis, as well as in the last and in the next, DON’T FREAK OUT!
However, if your main source of information is the Troll on Social Media, then perhaps you should be freaking out a bit more.
And then taking a deep breath and listening to the genuine experts in their field for some truths so you can make informed, safe and educated decisions.
Then relax….in a possibly toilet paper related quote – this too shall pass!
#InsiderOut #FinancialRelaxation
Melinda Houghton
Adv. Dip FS (FP), AFA, FPA
Insider Out – Understand and Trust your Advice
www.insider-out.com.au
melinda@insider-out.com.au
0400 533 865
This information may be regarded as general. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.
I am no longer authorised to provide financial advice. If you wish to receive financial advice you must contact an authorised provider.
https://www.moneysmart.gov.au/investing/financial-advice/financial-advisers-register
by Melinda Houghton | Feb 4, 2020 | Financial Advice
Good advice is out there. Need help finding it?
Have a look at this article in ifa magazine for some of my opinions.
Financial Relaxation is worth the effort of finding good advice.
https://www.ifa.com.au/opinion/27588-how-dare-you?utm_source=IFA&utm_campaign=03_02_20&utm_medium=email&utm_content=1&utm_emailID=875810f374cc3eca150051e410dca50cc0f8b47e23ea8c2d0b5125838e386b90
