Happy New Year all,
I hope you all had a marvellous 2017, and are gearing up for an even better 2018!
According to an SMH Article, around 50% of us made new years resolutions on Dec 31st 2017. They range from health and wellness, to financial, romantic, educational, and altruism, but unfortunately despite our best endeavours 88% of us will fail miserably (and will probably make the same resolution again on the 31st Dec, 2018!)
|1||Lose Weight / Healthier Eating||21.4%|
|2||Life / Self Improvements||12.3%|
|3||Better Financial Decisions||8.5%|
|5||Do more exciting things||6.3%|
|6||Spend More Time with Family / Close Friends||6.2%|
|7||Work out more often||5.5%|
|8||Learn something new on my own||5.3%|
|9||Do more good deeds for others||5.2%|
|10||Find the love of my life||4.3%|
|11||Find a better job||4.1%|
So why is it that we fail so comprehensively to achieve our goals? Well i can’t see any reasons why people plied with alcohol engaging in the biggest party of the year would fail to achieve their perfectly considered goals & resolutions, but apparently experts site a number of reasons….
- Biting off more than we can chew
- Treating a marathon like a sprint
- Overthinking – Just Do It!
- A real lack of belief in ourselves and our ability to achieve our goals
- We don’t track our progress
- We know what we want to achieve but haven’t really connected with why we want to achieve it
OK, so i guess they’ve got a few valid reasons. Well i’m going to weigh in with one more, and its certainly one that has been a major driver of my ability to achieve some of my goals in 2017 – Support.
Support can come in all forms and from all places – from your partner, your family, your mates, your mentors, and all of these wonderful people are absolutely indispensable in your journey, but there is also another group who’s support you’ll find invaluable as you seek to make it into that 12% of resolution keepers – Trusted Professional Advisors. Where your partner, friends & family provide the emotional support you’ll need, your professional advisors provide the specific know-how, and with the right combination, you’ll be unstoppable!
When it comes to your financial goals, i’m going to refer to your professional advisors as your ‘Financial Services A-Team’ – when it comes to your financial goals & resolutions you don’t want just anyone, you don’t want the B-team, you want the best. (You know that feeling when you find a great tradesman, mechanic, or a great hairdresser? Imagine the feeling when you find their financial equivalent and its more than your hair or car on the line!)
So without further adieu, i’m pleased to introduce your Financial Services A-Team.
Imagine trying to build a house yourself. You are responsible for the overall design and plans, the construction of the foundations, frames, & all associated carpentry and for engaging suitable trade professionals to complete the parts that you can’t (or are not legally allowed to – a qualified sparky must do your electrical, a qualified plumber must hook up your plumbing etc etc). Unless you’re a builder or a carpenter you just wouldn’t dream of it.
- You aren’t familiar with the Australian building code and associated regulations.
- You can’t effectively communicate with all of the various sub-contractors.
- Your subbies will be frustrated as hell with you and will likely do a worse job than if they’d been engaged professionally.
- It will take more time, more stress, more stuff ups, and achieve a poorer overall result than using a builder.
- It will test your relationship in ways you could have never imagined! (fortunately wifey and I made it through our reno’s in one piece).
- It will cost you far more than it should.
- The product you create will be valued far lower than it should be.
- You don’t get trade discounts.
Most people tend to recognise the above pitfalls when it comes to building houses so rather than going it alone, they engage a good builder. Better quality, less stress, faster completion… the choice is a no-brainer. Yet when it comes to finances, many people try to go it alone.
A Financial Advisor (or Planner) is the equivalent of your builder, and a good one will make your life a breeze. A financial advisor will:
- Help you qualify & quantify your financial goals.
- Design a strategy to help you achieve them.
- Work with you to ensure your strategy is tailored to your unique personal and financial situation:
- Cashflow considerations
- Asset protection
- Wills & Estate Planning
- Tax minimisation
- Life, TPD and Income Protection Insurance
- Engage with 3rd party financial service providers required to achieve your plan (solicitors for estate planning, wills, or setting up legal structures, Accountants for setting up business structures, or tax etc).
- Execute your agreed plan.
- Monitor your situation against your goals and consults with you to ensure its always aligned with your life needs.
We’ll look at what Financial Planners do in greater detail in the coming weeks.
A good accountant is absolutely indispensable. The amount of ‘hidden’ tax benefits i’ve uncovered over the years through working with my accountant has been amazing. There are benefits hidden in your investment properties, in your salary & wages position, and (massive amounts) in your business if you’re self employed or run a company. There are also major pitfalls and ‘tax traps’ they can help you avoid.
Accountants also run business advisory services, analysing businesses financial records in order to make recommendations for efficiencies, improvements, and delivering better bottom line results.
Its important to remember that accountants are not financial advisors, and are not legally allowed to give holistic financial advice (limited financial advice may be given pertaining to Self Managed Super Funds).
In lieu of using a financial advisor, sometimes people seek the council of their accountant when it comes to their investments. Whilst some accountants may also be successful investors, often their opinion is largely biased to the tax benefits of an investment strategy – a very dangerous bias that is likely to result in a sub-optimal investment. (If an investment relies too heavily on its tax effectiveness to be successful its probably not a very strong investment case to begin with).
A solicitor may play a small or large part in your overall financial plan depending on your circumstances.
For the purposes of financial planning a solicitor will largely be used in the areas of wills & estate planning. This involves ensuring that wills & powers of attorney are in place, and that your financial assets can be passed to your nominated beneficiaries in the most safe and tax effective fashion. Australian family trees are becoming increasingly complex, and blended families may create additional considerations when it comes to distributing the assets of a deceased patriarch or matriarch. An effective estate plan ensures:
- Your assets are passed to your nominated beneficiaries.
- Your wealth is passed to your beneficiaries in the most tax effective fashion.
- Your wealth is protected from claims by outside parties.
- That a trusted family member (or other trusted party) is able to make medical & financial decisions on your behalf should you become incapacitated.
Estate plans must be executed by a solicitor, however, given there are tax and other financial implications in estate planning, having a good A-Team (that communicate with each other effectively) will ensure that your plan works for you across all pertinent areas.
If real-estate forms part of your investment strategy, then you’ll no doubt need to work with a mortgage broker (or directly with a bank) at some stage to secure finance. Mortgage brokers help clients find the right finance for their particular purpose. They have access to a ‘panel of lenders’ and help match your finance needs with the most appropriate lender. Under most circumstances, mortgage brokers are paid by the lender, so the cost to the client is $0.00. They are not permitted to give advice – however, a mortgage broker may present you with all available options so you’re able to make an informed decision.
Your 1st house purchase is likely the biggest financial purchase / commitment you’ve ever made, so a lot of people place a lot of reliance upon ‘recommendations’ from mortgage brokers. In some cases mortgage brokers are successful and experienced investors in their own right, but unfortunately a great many simply have the minimum qualifications required for the job – and (having completed them) i have to say they’re not overly rigorous.
To assist in helping a buyer find millions of dollars in debt, a mortgage broker only requires a Cert IV in Finance & Mortgage Broking – which has a maximum course length of 6 months, but could be completed in as little as 2 – 3 weeks by an individual with suitable experience.
That said, many mortgage brokers are brilliant at what they do, and i have had some wonderful experiences. The key (as with engaging any professional) is finding a good one. To get the best out of your mortgage broking experience:
- Get your ducks in a row – get all of your documents and financial statements in order before approaching brokers.
- Try a few brokers and shop around.
- Ask your broker how many houses they personally own or have bought and sold. (Have they been in your shoes or is it a case of do as i say not as i do).
- Check your brokers ‘advice’ against other brokers, or a financial advisor.
- Many brokers are also Financial Advisors – seek them out. Even if you are only seeking finance, you may get some strategy guidance as well.
- Many brokers are affiliated with, or part & parcel of integrated financial services businesses – mortgage brokers (and in turn, their clients) may benefit from internal advice & support from Financial Advisors and accountants when they’re part of an integrated finance business.
Real Estate Agents:
I have a love / hate relationship with real-estate agents. Some are brilliant at what they do and provide a fantastic and valuable service to their clients, and others feel like an unnecessary middle man that i’d gladly cut out.
I have real-estate agents that i’d happily buy from, but would never list my house with, and agents that i’d absolutely list with, but would be unlikely to buy from (because they’d rightly be doing the best for their vendor and trying to extract as much cash out of me as possible!)
If you’re buying or selling real estate as part of your financial strategy (or just for your own home), remember these tips and tricks when working with real estate agents:
As a buyer:
- Don’t be emotional – as far as the agent is concerned, you’re house agnostic and are only a willing buyer if the deal stacks up.
- Do your own comparable sales analysis using the ‘sold’ section of realestate.com.au, and domian.com.au.
- Don’t get FOMO! – ‘Fear of Missing Out’ is the selling tool of all good agents
- Don’t totally reveal your budget. If an agent can get more out of you, they will (and should).
- If you’re offering – lead with a decent offer, your 1st & last. Don’t low ball – you’ll get the agent and the vendor offside. Make it decent and don’t feel the need to give pages of justification – its just what you can afford (or are prepared to pay).
As a seller:
- Compare multiple agents
- If an agent talks at you more than they ask questions – move on. You can bet they’ll do the same with prospective buyers. Buyers need to be questioned and qualified, not talked at.
- Are your agents incentives aligned with yours? An agent with a low flat fee structure is incentivised to sell as many houses as possible in the shortest amount of time possible, whereas an agent who is open to a tiered commission structure where they get an increasingly higher % for an increasingly higher sale price is more likely to work harder for you).
- Does your agent have greater marketing influence & reach than simply posting your ad on realestate.com.au & domain.com.au? Make sure they have qualified prospects and extensive social media reach.
- Make sure they’re experts in your local area. Do they know the market? The prospective buyers? The selling points of the town?
- Choose assertive… but not aggressive. An over the top agent will put buyers off straight away.
- Make sure they’re well groomed and well presented – If they have pride in their own presentation, they’ll care about the presentation of your marketing ads, your photos, your house on open day, and they’ll make a better impression with buyers (This one was a hot tip from a real-estate agent buddy of mine – the most well groomed agent in Northern NSW!)
Conveyancing is the branch of law that deals with property transfer and ownership. A good conveyor will make what can be a complex and stressful transaction a breeze. Conveyancers will:
- Unwind the legal jargon in your contract of sale and ensure that there are no unfavourable terms. (My wife and I had a contract recently that had terms that stated that if one of us should die before settlement, the other one was legally bound to complete the purchase – our conveyancer knocked that one on the head pretty quick!)
- Liaise with all relevant parties to ensure a smooth transaction (lenders, agents, and the other party’s conveyancer)
- Prepare for and attend settlement
- Lodge notices of transfer / sale
- Arrange payments of stamp duty
Property transactions vary from state to state so having a trusted conveyancer (in the state in which you’re buying or selling) can save you a lot of grief.
Choosing your A-Team:
For me personally, one thing is critically important when engaging professionals – they have to speak to you in language that you understand. If they speak to you in excessive technical jargon without a suitable english translation you can reasonably assume its more for their benefit than it is for yours.
- Are you trying to impress me with your technical mastery? – Sorry, to me you just look pretentious.
- Are you trying to intentionally confuse and cloud the situation so i feel reliant upon your expertise? – Sorry, now i don’t trust you.
- Are you relying on jargon because you only have a superficial understanding of your supposed ‘area of expertise’ and lack the deeper level understanding required to explain it in plain english? – Sorry, now i don’t respect you.
- Are you just plain incapable of effective communication? – Sorry, i need to have open, transparent and efficient communication with my professional advisors.
So if any of your new years resolutions were financial in nature, give yourself a fighting chance at joining the 12% of resolution keepers and start surrounding yourself with the right support team. Hang out with people who have done what you want to do, who have been where you want to be – people who will hold you accountable, challenge your assumptions and keep you on track. And when it comes to the biggest and most important financial decisions of your life – make sure you’ve got your trusted A-Team in place and ready to go into action for you. Start putting yours together today!