Buying a first home has never felt harder and – as just one of life's many defining moments – it's clear that people could use a helping hand!
With eight out of 10 Australians not seeking professional financial advice1 and going with the -she'll be right mate' mentality to their bank account, the launch of the Association of Financial Advisers' new consumer website and TV series Your Best Interests, will help Australians stop missing out on financial opportunities that could help better secure their future.
Your Best Interests provides Australians with a new consumer-friendly resource to give them real-life case studies, information from experts and the ability to connect with an adviser. Association of Financial Advisers' Chief Executive, Brad Fox said the website and TV series will provide Aussies with much-needed knowledge on how they might be able to improve their financial position.
'Australians typically approach their finances with a -do-it-yourself' attitude, and have quite a reactive, last minute approach to facing up to life-changing events such as marriage, children, home ownership, superannuation, retirement, illness and accidents," said Mr Fox.
'What they miss out on are the opportunities that come from planning ahead, speaking openly with family and friends, and also getting advice early on from a professional."
Similar to engaging a personal trainer or investing in a healthy meal plan, getting financial advice is an essential lifestyle decision and could prove to be one of the most important things someone does for their own future.
'Australians so often seek counsel from experts who can teach, advise and hold them accountable to their goals, yet can be quite reluctant to seek professional help about their financial health," said Mr Fox.
'Perhaps surprisingly, what people often find to be one of the best things to come from a better grasp of financial issues is a greater sense of wellbeing and control that benefits every other aspect of how they feel about life.
'Australians really do have the power to improve their future – and in turn – their personal wellness simply by making sound financial decisions earlier in life."
The Association of Financial Advisers (AFA) has a strong commitment to improving the level of financial literacy in Australia and wants to encourage people to think about life defining moments long in advance, get proactive with their finances and consequently reap the benefits.
The Your Best Interests website and TV series allows unprecedented access to the knowledge of around 2,000 financial advisers, which can help Australians from all walks of life realise a wealth of opportunities.
'Our primary concern is to help more Australians get in touch with their personal financial position through improving their understanding of money-related issues. On simple issues this will help people make better decisions than they do today, but we also want to help them recognise the signs that they need help from an expert," said Mr Fox.
The resources will give Australians insight into how to find the right adviser for them, as well as connect them with an adviser if desired.
Mr Fox encourages people to do their research and make sure they have confidence in the adviser that they see.
'Engaging a financial adviser is a lifestyle decision and shouldn't be done lightly," said Mr Fox.
'Financial advisers are people you can turn to. They will be trusted advisers and will be able to help you work through tough times, happy times and indeed any of those life defining moments that make up our day-to-day. It's more than just a transactional service relationship, they become colleagues who work with you to achieve financial success."
The Your Best Interests TV series was aired from 30 June to 26 July Tuesday evenings 8pm, on free-to-air channel 4ME (74), on the Business and Finance section of the 4ME website and through the Your Best Interests website.
To learn more about Your Best Interests visit www.yourbestinterests.com.au
The AFA has been the authentic voice on the value of advice since its beginning. Founded in 1946, the AFA is the oldest association representing financial advisers and their clients in Australia. Today, the AFA is a vibrant, innovative association that remains driven by its member advisers and a shared belief in the need for great advice for more Australians.
'We are passionate about financial advice and the difference it makes to the lives of Australians" – Brad Fox, AFA CEO.
Question: What is Your Best Interests?
Brad Fox: Your Best Interests (YBI) is an initiative to help more Australians come to grips with issues around money and their wealth, or often, lack of it! Centred around the Your Best Interests website, and a four part TV series available on free-to-air channel 4ME (74), YBI supports everyday Australians facing life defining moments such as divorce, having a child and planning for retirement. It is a source of useful information which can help Aussies take control of their personal finances. Importantly, it helps you recognise the trigger points where you need expert help.
Question: Why did you think it was important to release the Your Best Interests concept?
Brad Fox: Although Australia has a safe financial system, it is very complex and most Australians can't get the best out of it by themselves. We want people to be more comfortable addressing money issues rather than putting them in the -too hard' basket. We also want people to better understand where to get expert help if they need it, including developing a better understanding of what financial advice is, who can provide it, and what sort of outcomes it can produce. It's certainly not just about numbers and money – it's about creating a lifestyle that works for you.
Question: Can you tell us a little bit about the real life scenarios featured in Your Best Interests?
Brad Fox: We have shared a few real-life examples on YBI that demonstrate how seeking financial advice can impact a person's financial situation. Helen is a recent divorcee that has ended up with the family home but it is desperately in need of renovations that she can't afford. Alongside this, Helen couldn't see a future where she would retire with enough money to have a lifestyle that is acceptable to her. Together with her teenage daughter, they went through a financial advice journey that includes a financial adviser and the support of two other expert commentators. Through addressing her concerns, Helen now has a clear vision that includes renovating the home with plans to sell it and move to a better location. This move will satisfy her lifestyle goals today, as well as in retirement, and also includes funding the trip to Italy she has been craving.
In another of our real-life examples, we share Lisa's story. Having been married just nine months, Lisa's husband Rowan suddenly died of a heart attack at the age of 33, turning her world upside down. Lisa realised that Rowan would have wanted her to pursue her dreams. With the help of a life coach and financial adviser, Lisa made the impossible possible, launching her online homewares store, "Follow" as well as planning for an independent financial future.
Our third story is about Amy and Rob. The couple met at work, fell in love and had two lovely children. They lived in a two-bedroom unit and had a big mortgage on another property as well. Not big income earners, their finances were already stretched, and when they finally decided to tie the knot, it was the wedding of their dreams and a honeymoon to remember that became top of their list. When the two met with a financial adviser, their thinking was challenged as they reassessed their priorities to discover what mattered most now, and into the future.
Question: What are your five top financial tips when planning for a family?
1. Brad Fox: Talk to other people, but make your own decisions
There is a lot of free advice people give you when you are expecting a child – especially your first – and while other people's experiences can be valuable for you to learn from, you still need to do your own research. This is particularly true for how you will need to manage your finances. Something that worked for someone else may simply not be right for you. Seeing a financial adviser will help you manage your cash flow, have the right life insurance in place, and also maximise benefits from Centrelink and taxation strategies.
2. Practice living on less than two full incomes
Most couples will have less income after the birth of their first child depending on maternity leave payments and how long they intend to have off work. With this in mind, whilst planning, try to live on the income you expect to have after the birth. It can be difficult. You will certainly see a change in what you spend your money on once Bubs is around, and the danger is that your spending can easily creep up if you don't reduce costs on some everyday items.
3. Get your debt organised
Whether it's your mortgage or bad debts like personal loans, store cards and purchases, be organised before the income drops. Banks and lenders hate surprises like repayments being missed. In some cases short-term repayment -holidays' are possible, but remember they never put the interest they add to your loan on holiday – it will keep mounting up. The best option is to plan your cash flow and keep on repaying with the focus on the highest interest rate debt first.
4. Plan for childcare (and your Plan B options)
I know of too many couples that can't get the childcare arrangements that they want before returning to work. The consequence is that often maternity leave extends for longer than they anticipated meaning less income than they expected. The costs of childcare catch many new parents by surprise. You need to do your homework. A financial adviser can help you navigate the maze of rules around Centrelink entitlements and taxation implications. New parents also need a Plan B – can the other parent become the primary care giver? Will grandparents help? Will your employer give you more flexible working arrangements?
5. You don't need everything
Buying new stuff costs a bomb so don't do it! Babies grow fast and often very expensive items have had minimal use and are in brand new condition, so why not borrow from a friend or relative, or buy second hand? Often a second-hand item can be sold later for the same price you paid for it too. Baby stores are brilliant at helping emotional, excited parents-to-be to 'want" a whole load of things that you really don't 'need". My advice is buy the basics first and you can always add to it later. In saying this, you should still get one item that feels special to you as parents – we all make decisions with our heart first so satisfy that need as well!
Question: Why do you believe so very little Australians seek financial advice from an expert?
Brad Fox: Research shows that most Australians are a little embarrassed to ask for help around money matters. This is equally true with people on very high incomes as it is with people on modest incomes. In fact it's surprising how many people that look like they have money actually don't; what they do have is very high debts that are funding that appearance.
The second thing is that the concept of financial advice is not well understood by most Australians. They know what an accountant does, but don't fully understand what a financial adviser does, and how they will add value are commonly asked questions. Financial advice creates a connection between where a person wants to see themself in the future and where they are today. It's not just about money and crunching the numbers; it's actually about considering possibilities and then making decisions and compromises with the knowledge of what will likely happen as a result.
Financial advisers are more like a personal trainer in that they help you change behaviours and habits to get better results, and they keep you on track to the promises you make to yourself. Superannuation, life insurance, cash flow, estate planning, aged care, investments – these can come into financial advice but the real gold is the skill of the adviser in using these things to achieve the lifestyle outcomes that you want for yourself and your family.
Question: What are the advantages of seeking financial advice from an expert?
Brad Fox: Objectivity and accountability. How many of us have started a fitness or eating plan, a self-study course, or a personal enrichment goal and failed to achieve it because we lost interest, got busy, became distracted or were never suited to it in the first place? A financial adviser brings objectivity to help people see a range of possibilities and the consequences and trade-offs between different decisions. Then, the real work begins of staying on track to the decisions and promises you have made – this is where your financial adviser becomes an accountability coach. In most cases people can achieve far more with the money and income that they have but it takes someone else to help them discover that. With at least one in three people spending more money than they earn, becoming accountable for our decisions is vitally important.
Question: What can a financial advice help with when someone is planning to buy their first home?
Brad Fox: The first step is for an adviser to help you establish a true view of what your current spending and savings pattern is like. From there, mapping out what level of debt you can really afford (rather than what level of debt a bank will let you have) is critical. Your adviser will also allow for future changes like an increase in interest rates and will factor in what your intentions might be about job changes, having babies, getting married and other significant financial changes you might encounter.
A financial adviser will also help ensure that you protect your ability to pay the mortgage if you get sick, have an accident or die, through a range of life insurance solutions. This is often more affordable than people expect, but be aware, not all life insurance is what it appears to be. Getting a financial adviser to arrange your income protection and life insurance often costs less than the insurance advertised on TV, and it is normally better quality insurance as well. Don't risk buying insurance unless you understand the contract or you might pay for something that is unlikely to ever pay you.
Financial advisers can also help you with deciding on the best way to save your deposit. Too many potential home buyers without an adviser think the share market is the right way – that's probably too much risk for most people. Your financial adviser will have safer alternatives.
And finally, many financial advisers also work with professional colleagues that provide mortgage advice and shop between the banks and different lenders to get you the best home loan deal. You can ask them for a referral to a mortgage expert that they trust.
Question: At what times in our life should we seek financial advice from an expert?
Brad Fox: The greatest risk is missing out on opportunities because we didn't know what was possible. Most people facing a life defining moment like those featured in Your Best Interests would benefit from meeting with a financial adviser. As an example, so many people work longer than they needed to because they didn't know they could afford to retire. If you find yourself regularly thinking about money decisions, your wealth, and your future, it's time to seek out an adviser, but make sure they are a member of the Association of Financial Advisers which means they abide by a Code of Conduct that expects more of them than the law requires. You can find one at www.yourbestinterests.com.au by using the Find an Adviser search.
Question: What is your most valuable savings advice?
Brad Fox: Save before you spend! Most of us are really good at spending and if we don't take some of our income and put it away safely as the very first thing that we do after we are paid, it will end up in movie tickets, dinners, wine or gifts for friends and family. Make saving a priority and get a financial adviser as your accountability coach to keep you on track. In the long run it will pay off at least as well as personal training classes, and much better than pedicures, tattoos and big nights out.
Spending more than you earn always ends badly.
Interview by Brooke Hunter