The wealth advice that makes financial planning’s future bright

Financial advice is now much more than selling products, and its strategies will deliver Australians and the industry a better future.

For an industry that’s less than 50 years old, financial planning has had an interesting rollercoaster ride of a life – and its next 50 years will be crucial for Australians wanting greater wealth and retirement security.

While the Hayne royal commission shone a light on previous poor industry practices, it took the shine off so much of the good work financial planners do, work that involves important long-term strategies rather than flogging products.

That strategy work will become more important, particularly as trillions of dollars of wealth transfers from baby boomers to their children and the nation’s superannuation pool multiplies.

Traditional financial planners today have more competition in online robo advisers, investment platforms delivering a range of options, and government moves for super funds to provide tailored advice.

However, big-picture strategies and lifestyle planning will become increasingly important as Australians demand more wealth and experiences in the future.

Adviser strategies, for example, may include:

● Avoiding a de facto death tax by massaging the superannuation accounts of senior Australians;

● Wiping out capital gains tax on properties and other investments through clever use of self-managed super funds;

● Maintaining a client’s focus on their long-term goals, which may avoid talking them out of dangerous knee-jerk reactions during times of turmoil on financial markets;

● Protecting people’s assets by managing risk through life insurance, but also potentially saving money by recognising when clients are over-insured.

These strategies often are most suitable for older clients, but younger generations also can benefit from an early relationship with a planner.

Financial planning is important for younger generations. Picture: iStock

For example, harnessing the power of compounding interest is one of the greatest wealth-creation strategies available. Advisers can prompt young adults to make extra injections of cash into super or investment funds, and help them avoid the biggest financial regret of many older Australians – that they didn’t start saving early enough.

Paying for advice also has changed dramatically after government bans on certain product commissions and trailing commissions. Financial planning is more of a fee-for-service proposition, which helps bring advisers closer to their long-term goal of being seen as a serious profession – like doctors, accountants and lawyers – rather than a money-making business.

Younger generations can visit an adviser, pay the fee, then opt out of ongoing advice fees for several years, knowing they have started on the road to riches.

The disappearance of many ongoing commissions is one reason the big four banks have largely withdrawn from providing advice – there’s not enough easy money in it for them.

I briefly worked for a big four bank as a financial planner in the mid-2000s, and felt like a product pusher rather than someone trying to help others get ahead financially. Weekly sales meetings and performance measurements based on revenue rather than the number of clients I assisted drove me back to the finance media.

However, if any young adult today asked me if financial advice is a worthwhile profession to enter, I’d say go for it. They’re on the right side of a supply-demand squeeze, and can gain satisfaction of helping people set a path towards fulfilling their financial and lifestyle aspirations.

Discussing financial information with family and friends remains a taboo subject for many people, so the fact personal financial data and dreams are revealed to financial planners shows the trust installed in them by clients.

And in a world where knowledge is power, the education a finan­cial planner can provide is rewarding for both client and an adviser.

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This article appears in The Deal/Barron’s Top 100 Financial Advisers 2023 magazine, online and in The Australian on Thursday.