Financial planning is really about strategies to help your clients maximise their economic happiness over their expected (and increasingly longer) lives.
Financial products, that is, various types of managed investments and insurance policies are useful tools. But they are rarely the main game. No one hires a plumber because he has a good monkey wrench. They hire the plumber who knows how best to use that wrench.
Your financial planning advice has to go well beyond institutional products to be effective advice. Your advice has to create and implement financial strategies designed to change client behaviour and lead to greater economic happiness.
For example, when you discuss super with your clients, don’t stop at ‘what super fund may best suit their needs.’ That’s a limited and limiting discussion. Go further and identify ways they can increase the amount they pay into super to take greater advantage of the super tax concessions. That’s where you can kick goals. ‘How much more can you get into super’ solves more problems than ‘which super fund should hold what is already there.’
- for employee clients, increasing salary sacrifice contributions above the statutory minimum to get a bigger super snowball rolling faster sooner;
- for self-employed clients, gearing up their business outgoings to free up (debt-free) cash to be used to increase their personal super contributions, and paying these increased contributions on a drip fee/dollar cost averaging basis;
- reducing, or eliminating, home loan repayments and increasing super contributions on a grossed up basis, earmarked for tax benefitted home loan reduction on ultimate retirement;
- habitually recommending every female client contribute an extra 2 or 3% of super while working to compensate for their time out of the workforce; and/or
- migrating non-home assets to a super environment as age 60 approaches, and the tax free investment period starts.
Usually at least one of these strategies will suit your client. Often it’s more than one.
It will have a greater impact on your client than the question of whether MLC’s super is or isn’t better than the AMP’s super fund.
(For the record, we reckon both MLC and AMP are fine. They are both good funds. But there is no way of knowing which will do better over the next twenty years, and there is therefore no point in spending untold hours contemplating, discussing and researching this question with your client.)
Time is much better spent creating and implementing super contribution strategies for your clients that make a much more significant impact on their future economic happiness.
Create “with my advice” and “without my advice” computations. Summarise your computations in tables and graphs to highlight the impact of compound interest over time. Stress it’s an annual saving connected to a long-term strategy. Not a once off thing.
Build on-going regular reviews into your client value proposition.
Reproduce the graph on your SOA frontispiece for maximum client impact.
And maximise the probability your client will accept your advice.