Advisers can make a difference to the nation’s financial well being

Advisers can make a difference to the nation’s financial well being

Financial Advisers

can make a difference to the nation’s financial well-being

 

Once a teacher, always a teacher! As the designer of Financial Mappers, my first thoughts when I started developing the concept for the software was “I have the skills which empower me to give the world a means by which everyone can be the master of their financial future”.

 

After years of product development, I am ready to pass that education role to our financial advisers who are best equipped to teach our community the simple rules of money management.  By starting an early engagement with future advice clients, our community will be more productive when valuable resources are not wasted with poor financial choices.

 

Financial advisers are best equipped to provide the community with financial advice when the time comes for major financial decisions.

 

When it comes to poor money management skills, this is my favorite quote.

 

We buy things we don’t need with money we don’t have to impress people we don’t like – Dave Ramsay

 

How different would Australia be if financial advisers could just convince our community to remove that the average credit card debt of $3,000 and start using the wasted interest on a savings plan?

 

Together Australia

 

The financial services industry has shown its support for a national campaign called Together Australia, to support financial literacy in our community.  This is a fantastic resource for the community.

 

The website explains what financial advisers do and how they can make a difference.  There is a great video clip, “What a house call from a financial adviser could do for you”.  It shows how an adviser helps a single mum affected by the economic effects of COVID-19.

 

financial planning software

 

This website is an unbelievably valuable resource of current financial information with articles uploaded regularly.  The big decision for most in COVID-19 stress is whether or not to take the early withdrawal of superannuation funds.  Here several articles gives the pros and cons.

 

The website provides a calculator, so people can see the long-term effect on their savings.

 

Overconfidence in Financial Literacy: Implications for Planners

 

The Financial Planning Research Journal published the article “Overconfidence in Financial Literacy: Implications for Planners”, in 2017.  While this research was based on university students, there appear to be some compelling reasons for financial advisers to recognize, not only the financial literacy skills of their clients but their client’s self-evaluation of those financial literacy skills.

 

The article says that financial advisers have a duty of care with the “Client’s Best Interest Rule”. 

 

It states that to satisfy the best interest’s duty, advisers need to have an accurate understanding of whether the client’s attitude to their financial literacy skills matches their real financial skills.  To discharge their duties, advisers need to be confident that clients understand the advice they are being given.

 

It was found that overconfidence can lead to underestimating risks of certain investment choices.  This overconfidence may pose a risk to advisers who must satisfy their best interest duty. 

 

The implications for financial advisers is that unless their client understands the basis on which their advice is given, the likelihood of that advice being offered may not be fully implemented.

 

In conclusion, the article states:

 

These findings underscore the importance of planners using both self-rated and objective measures when determining a client’s level of financial literacy.

 

It’s the little things which make the biggest difference in financial advice

 

Government regulation for the financial advice industry is forcing advice beyond the reach of everyday Australians who would most benefit from advice.  The public is left getting their general advice from unlicensed and often unqualified people.

 

To me, this is a national disgrace.  It is time that ASIC recognized the importance of financial advice and enacted legislation that allowed financial advisers to do what they are trained for – provide advice appropriate to their needs.

 

Financial Advisers are best equipped to mold the nation’s financial well-being.

 

While facing these constraints, financial advisers can work at a ‘grassroots level’ to ensure their local community receives appropriate information about money management.  If the community can be encouraged to recognize that better money management skills, will improve not only their financial well-being but also their general well-being, the community will be better placed to improve the nation’s productivity.

 

If you think about it, there are a few simple concepts, which the consumer needs to embrace.  If the adviser can find a means to include the teaching of some financial literacy training as part of their service offering, the adviser can start to engage with their future full-service clients.

 

Many advisers are now embracing lifestyle coaching and preparing their clients for life events.

 

Becoming a Financial Coach as an Alternative to the Traditional Financial Adviser Business Model

 

Christine Teh is a financial adviser who decided to change her career to that of a full-time financial coach.  If you would like to hear what she had to say, listen to her interview with Michael Kitces.

 

This is Podcast 185: Becoming a Financial Coach as an Alternative to the Traditional Financial Advisor Business Model.

 

Michael Kitces podcast

 

At the start of the podcast, Michael Kitces says:

 

I think in our traditional financial advisor world, we don’t live in the realm of budgeting, in part because it’s very hard to have those conversations with clients.

 

The take-away from this podcast is that unless the client can build a healthy relationship with money, they will not progress to the stage where they can actively invest and build a better financial future.  That is, they cannot get to the point where they require the services of a financial adviser.  Instead, they are stuck in this cycle of negative cash flows and ever-increasing debt.

 

For Christine, the foundation of her work is around budgeting.  While there are apps that will track a person’s spending habits, she does not believe these are effective tools.  She insists that her clients keep a spreadsheet she has created, on their phone, where they must enter every spend.

 

She comments that many clients resist this at first, but if the client records their spending at the time of the spend, maybe they will stop and think, “Can I afford this, or is this something I really need?”

 

To cap off the interview, Christine says:

 

With budgeting, you are training your money so that you are becoming the boss. Money is your employee.” So that’s all part of it. When you have a budget, you are in control. You tell money where to go. There’s so much power when you actually know how to budget. I think over time clients realize that.

 

Financial Literacy Programs in Australia

 

In 2013, Griffith University published the article Financial Literacy and Financial Literacy Programs in Australia.

 

The abstract states:

 

Financial services markets require consumers to be more financially literate if they are to manage their finances effectively. In response to observed deficiencies in financial literacy, a large and increasing number of financial literacy programs have been implemented worldwide, not least in Australia.

 

Regarding Australia’s standards of financial literacy, the following was found:

 

  • Most Australians appear to understand day-to-day money management skills, but they struggle with more complex concepts such as investments, superannuation, and saving for retirement.
  • Many Australians appear open to the benefits of financial education
  • A large number of factors appear to influence financial literacy. These include attitudes and beliefs about money, confidence and engagement in financial matters, together with socio-economic and demographic characteristics

 

In more recent times, that Hilda Report has found that more than 50% of Australians could not answer a simple set of five questions relating to financial concepts.

 

If clients don’t understand the meaning of common terms used when an adviser is explaining their advice, how can the adviser expect the client to engage with the advice, or recognize the value of the advice?

 

In my financial literacy program, Money Smart Tips in 3 Minutes a Day, I have addressed the five questions asked in the Hilda Report.

Financial Literacy

 

 

Advisers recognize the importance of Financial Literacy

There is a growing number of advisers who recognize the importance of providing financial literacy programs before clients graduate to “advice clients”.

 

Daniel McGregor, of Wealth Train and Workplace Wealth, is one adviser who is passionate about the importance of financial literacy.  We are kindred spirits in that we both believe financial advice should be affordable and accessible to all.

 

Daniel explains that people can both save for tomorrow but also live for today.  He offers a free financial fitness test.  As he explains financial fitness means:

 

  • Minimal financial stress in your life
  • Having control over your day-to-day, month-to-month expenses
  • Having the capability to absorb a financial shock
  • Being on track to meet your financial goals, and
  • Having the financial freedom to make choices that allow you to enjoy life.

 

WEalth Train cash flow modelling

 

Daniel offers a range of services in this field.  Just by reading the comments of his clients, make you realize how valued his services are:

 

An excellent introduction to financial management.  Daniel is an excellent communicator.  I left with the confidence to take charge of our finances – Frank M

 

As one of Australia’s leading advocates of advisers including financial literacy as part of their service offering, I asked Daniel to share his views.

 

Daniel McGregor of Wealth Train and Workplace Wealth

 

A number of national studies have consistently shown Australians’ financial literacy is generally poor. More than half of Australians struggle with basic financial concepts and surveys have found low financial literacy usually translates to poor financial health.

 

financial literacy

 

It’s an interesting time to be discussing this, as many Australians are now finding themselves in financially tough situations having entered the coronavirus pandemic period already poorly equipped. Many Australians were already finding household budgeting decisions tough, they were finding saving a struggle. A lot of Australians find themselves with too much debt. Many are struggling to prepare financially for retirement in part because of a lack of understanding and therefore interest in superannuation. Much of this boils down to poor financial literacy.

 

Many people are on different levels of the financial literacy spectrum and I’ve found some people are confident to do most financial things themselves once they have the right level of financial literacy. Some who have a very high level of financial literacy are still quite happy to outsource financial management decisions to a financial adviser.

 

Either way, I believe it’s fair to say that Australians and Australia would benefit from overall higher levels of financial literacy.

 

I’ve run a number of workshops for members of the public while also offering personal financial advice, and I believe there is a need to provide advice in various forms to meet varying levels of need. It’s one of the reasons why my business partner, Dave Harper, and myself started our joint venture, Workplace Wealth. We see the progression of employee wellbeing programs naturally moving towards the financial health of employees, now that many employers have already taken steps to help their staff with physical and mental health. There is ample evidence that financial stress is the number one cause of stress and also relationship breakdowns. Employees bring those stresses to work and it significantly impacts their productivity.

 

Workplace Wealth

 

One of the main issues Australians have had when it comes to getting help with their financial decisions is knowing who to trust. We believe through Workplace Wealth we provide a means for employers to enable their most valuable assets, their employees, to get great quality financial education and advice from a trusted source.

 

It’s a win-win for employers and their employees.

 

As a long-time supporter of change in the financial advice industry, I believe improving financial literacy would likely lead to more people seeking financial advice in one form or another and open opportunities for the industry to build a bridge of trust between potential consumers and providers of advice.

 

Financial Mappers LITE

 

Financial Mappers is assisting advisers to provide more affordable advice to all with the inclusion of a 5-year planning tool for clients.

 

This service can be provided to clients, independent of their advice platform, through Financial Mappers Lite.

 

A similar service is available within Financial Mappers Pro.  Here the adviser can provide the client with access to the software, so they can create a 5-year financial plan, without the other limitations of the Lite version.  When the client is ready to pay for financial advice, the client can share the plan created and ask for specific questions and receive scaled advice.

 

In the meantime, the client has access to all the adviser’s financial literacy products and can engage with the adviser on a general advice level, thus reducing the cost of the service to match the client’s needs and budget.

 

Watch our Financial Mappers LITE video so see how easy it is for clients to make plans.

 

Financial Mappers Lite

 

 

Glenis Phillips SF Fin

Designer of Financial Mappers

 

 

 

 

Disclaimer: Financial Mappers does not have an Australian Financial Services License, does not offer financial planning advice and does not recommend financial products.

I am a founding board member of Plencore Wealth Ltd and Plencore Online Pty Ltd. I am the designer of the product Financial Mappers and Financial Mappers PRO, cloud based modelling software for Personal Finance. This software is sold on the web site www.financialmappers.com.au.I am an educator, investor and expert in both personal finance and mathematical modelling and the author of 'Map Your Finances'.I have both a Graduate Diploma in Applied Finance and Investments and a Diploma in Financial Advising from the Securities Institute of Australia. I also have a Financial Analysis Certificate, by Distance Learning from University of Technology, Sydney. I am a Senior Fellow and Senior Mentor of FINSIA.

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