Investing Essentials: How a financial adviser can help

Bennelong Funds Management

August 2023

Many of us want to save effectively, invest well, and generate sufficient funds to pay for a home, children's education, travel and, ultimately, a secure retirement. But navigating a complex financial landscape can be intimidating. Fortunately, there are professionals who can guide you.

Seeking the advice of a qualified financial adviser may add significant value over your lifetime. Here is a snapshot of some of the things an adviser can assist with.

Budgeting and managing debt

In order to invest, you need to work out where the money will come from. A financial adviser can help you manage your income more effectively by carefully identifying and monitoring your spending patterns and expenses.

They can also help you get the full picture on your debt load and work out which parts are:

• 'inefficient' debt - borrowing to buy goods, services and assets that are known to depreciate in value, or have no value once used; and
• 'efficient' debt - where you buy assets that generate assessable income and have the potential to increase in value.

Insurance: the importance of security

Adequate insurance coverage to provide you and your family financial security is crucial, particularly if you are self-employed or own a business.

A mix of suitable life insurance, income insurance, business insurance and general insurance is highly individualised. Your financial adviser's expertise in this area can save you a great deal of time and worry.

Building an investment portfolio

Only after budgeting and insurance do we get to investment. Your financial adviser will gather all of the relevant information on your personal financial circumstances, objectives and risk tolerance, and help you choose the right types of investments to fit your needs, personality, goals and time horizon.

Your adviser can help you build a diversified investment portfolio, often spread among a range of asset classes to aim for positive returns while balancing the overall level of risk. What's more, they will regularly assess the plan to ensure it continues to meet your needs, altering your investments as you reach different stages of life (for example, wealth accumulation for younger investors versus a steady income stream for retirees).

The three pillars of retirement

Your financial adviser should be an expert on Australia's 'three-pillar' retirement-funding system: compulsory superannuation, the government-funded age pension, and voluntary contributions by individuals to their super accounts.

Australia's superannuation system can seem complicated, and most people can benefit from sound technical advice from a professional - whether it's to maximise the benefits, or minimise the tax burden.

What to look for

Choosing a financial adviser is an important decision. Ideally, it will be a lifetime partnership (and even a multi-generation partnership, taking care of your family's needs). You need to establish a strong rapport: they will know all about your financial affairs, your dreams and aspirations, and even how you want your affairs managed after you die.

You therefore need to ensure the person is a trustworthy and knowledgeable professional, and someone with whom you're comfortable working with over the long term, who can regularly maintain and review your financial goals as you enter different stages of life.

There are several professional bodies who may be able to assist you in selecting a financial adviser, such as the Financial Advice Association Australia's find a planner page.

For more insights visit www.bennelongfunds.com

Disclaimer

The content contained in this article represents the opinions of the author/s. The author/s may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the author/s to express their personal views on investing and for the entertainment of the reader.