According to ‘Investment Trends’, demand for financial advice has doubled in the past four years[1]. There is clearly growing recognition of the value of good advice and the benefits it can provide. An estimated 3 million Australians are considering getting some form of advice in the next year or two.
However, people often struggle to engage with financial (product) advisers – as the way their firms operate doesn’t suit everyone and the costs and ongoing fees can seem alarmingly high.
But don’t panic. Often retirement decisions are more about cashflow planning, life decisions and strategy than choosing between different products.
Decisions about when to retire and how much you spend are at least as important as making sure you get an extra percent point or so on your investment returns. Many Australians make their own financial decisions once they feel informed about the issues. Learning what support is on offer and where to obtain it is key.
Here are the main sources of help:
- Free information:
There is lots of free information online – although it can be overwhelming to piece it all together. The trick is knowing which websites are user-friendly and trustworthy. Government sites can be good. E.g. The ATO publishes information on super, SMSFs and tax-related matters. Services Australia publish lots about the Age Pension and means testing rules. Your super fund might also have helpful content (but careful – they often brush retirement risk under the carpet – including the hard truth that if you spend too much your super will run out). - Paid information:
Books like Barefoot Investor have been invaluable for helping thousands of Australians get in control of their finances. Good books provide facts and lots of guidance on what to do. We are big fans of Barefoot (except for his chapter on retirement – it’s not really possible to keep working part time till you die!). Paid for websites like SuperGuide are also fantastic for learning how the superannuation and Age Pension rules really work. - Free advice:
Financial counselling services offer free and confidential information, support and advocacy for people who are facing financial difficulty. They are provided through a network of community organisations, legal centres and government agencies. The federal government’s Financial Information Service provides free information and education on various topics such as investing, superannuation, retirement planning, the Age Pension and aged care. The service isn’t licensed to give personal financial advice though. So it can’t give product recommendations or tell you how to invest your money. - Advice from super funds:
This ought to be a fantastic way to get confident about your retirement decisions. But many people we speak to say they’re frustrated with the support they get from their fund. Part of the problems is the laws affecting what super funds can and can’t say. Funds also perhaps limit their focus to simple topics like putting more into super or choosing an investment option – rather than how to design the sort of complete cashflow plan you will need to make your Big Retirement Decisions such as how much you need to retire. - Free online calculators:
These sound great but in reality don’t seem to give people much confidence. If there’s one or two inputs or outputs you don’t understand then it’s hard to be confident your results are right. Because they’re free, they often aren’t as comprehensive as they should be and omit material factors about people’s retirement. Our senior actuary, Jim Hennington, led the Actuaries Institute’s work on ‘Good Practice Principles for Retirement modelling’ but, sadly, few online calculators meet them in 2022. - Paid for calculator service:
This is what Jubilacion provide, as a ‘live online’ service. A specialist from Jubilacion helps you model your financial situation using our easy-to-understand yet highly comprehensive ‘stochastic’ model. This is an inexpensive way to obtain quality results to empower confident retirement decisions. No financial product recommendations are given – it is based on your existing products and decisions. This can supplement other advice you receive such as tax advice from an accountant and product advice from a frinancial product adviser. Jubilacion is run by Actuaries (see ASIC RG 276.209(a) – page 41 and our ‘Your Actuary’ PDF). - Licensed financial advice:
A person who provides financial product advice must hold an Australian Financial Services License (AFSL) issued by the Australian Securities and Investment Commission (ASIC). Australians who can afford ‘holistic’ advice (sometimes costing up to $10,000 per year) often are very satisfied with it. Good advisers go beyond just providing ‘product’ advice – they’ll carry out modelling and projections of your retirement. However a problem advisers face is the legislation they must comply with hasn’t broadened sufficiently in line with best practice over the years. Business models have ended up designed around the regulator and the legislation rather than focussing on delivering sound outcomes in a way that suits consumers. For example, a surprising number of important financial planning topics are not even covered by the legislation. Nearly half of licensed advisers have exited the industry since 2018 and the government are therefore carrying out a Quality of Advice review.
As you can see, there are a number of ways to get support for your retirement plans. Jubilacion would be delighted to speak to you about how our particular approach may help you. The benefits of having a thorough financial projection are:
- Lets you set and prioritise realistic financial goals
- If your goals aren’t realistic, find out early and explore what can be done. If they are achievable then explore what else you could do with your money.
- Learn how to manage long term cash flows (from a range of sources)
- See how you’ll pay down or manage debts over time
- Take government assistance into account
- Take risk into account – e.g. cost of living increases or market crash scenarios
- Understand how much you’re likely to leave when you die
Knowing you’re on the front foot with finances brings significant peace of mind. Research shows that having a good financial plan brings:
- Greater levels of happiness
- Improved relationships due to the alleviation of financial stress (money is one of the top three causes of divorce in Australia)
- Better health
For a personalised projection of your retirement to empower confident decisions[2] speak to Jubilacion today.
[1] Investment Trends, Financial Advice Report
[2] Based on your existing financial products
