The Role of a Financial Adviser
The Role of a Financial Adviser

The role of a financial adviser is not only concerned with investing. This article looks at the components of holistic financial advice. There are 6 key areas which are set out below in order of stages of life. By Jonathan Grigg, National Practice Manager, Wealth Management



Managing money

This area of advice is concerned with your cash flow, debt repayments and saving. These are decisions about your current situation, which need to be revised and updated with changes to your income and expenses over time.

Having a sensible budget begins with saving either a set percentage or a set amount of your earnings and then meeting essential expenditure. A good budget also allows for discretionary expenditure such as entertainment and holidays. This establishes a discipline for successful financial management.

Early in your working life, saving is usually a high priority and any debt should be managed carefully. For those with a mortgage, budgeting is important so that loan repayments, and the incidental costs of owning a property can be met as they arise.

After you have paid off your mortgage, funds previously used for loan repayments can be reallocated to additional superannuation contributions (pre or post tax) or invested outside superannuation.

For retirees, a budget will help to ensure that your accumulated assets last as long as possible.
Valuable Budgeting strategies include:
  • Planning all your weekly/monthly expenses, as well as larger expenses such as car registration and servicing, and utilities over a year, so you can manage them as they arise;
  • Setting the amount of income to be saved (or paid as principal & interest home loan repayments rather than interest only payments); and
  • Using debit cards for payments, rather than credit cards which can encourage people to purchase things they cannot afford and thus accumulate debt.
The popularity of budgeting services and online tools has grown strongly over the last decade, which underlines the need for budgeting advice. A financial adviser can assist you with your budget and help you make the most of your income at the various stages in your life.




This area of financial advice is concerned with protecting you and your family from significant financial hardship or loss, due to an accident, illness or other adverse event during your working life.

Most people are familiar with general insurance such as home and contents insurance and motor vehicle insurance. Business owners may be familiar with Key Person, Business Continuity and Professional Indemnity Insurance. However some will be less familiar with Life Insurance, Total and Permanent Disability (TPD) Insurance, Trauma Insurance and Income Protection Insurance.

Income Protection Insurance is usually tax deductible. Life and TPD Insurance can be paid from your superannuation and you may also be able to claim a tax deduction for contributions which cover the premiums for these insurances.

It is usually both easier and less expensive to obtain most personal insurances the younger you are, and so it is suggested that you consider obtaining advice on insurance cover earlier rather than later in life. Also, your insurance needs are likely to change over time. Adjustments might be needed to the cover that you have, and therefore your Insurances should be periodically reviewed.

A financial adviser can review and arrange insurance for you, or refer you to a specialist insurance advice provider to attend to your needs.



Building capital

Investing is concerned with decisions about allocating capital and building up your assets over time.

Your superannuation is one way of investing. You can also invest outside of superannuation in your own name or through a Company and/or Trust.

There are advantages of investing through superannuation, including the concessional tax treatment of contributions, earnings and realised capital gains. However, access to your funds is restricted as superannuation is preserved, and you must meet a condition of release to access it. If you are a high-income earner with an assertive risk profile, investing using a margin lending facility may have some advantages over superannuation. Investing through a company or a family trust also may have some advantages over superannuation, including access to capital and streaming of earnings.

A financial adviser can not only assist you to determine the most suitable investments for you but can also direct you to legal and tax professionals to ensure the structuring of your affairs is optimal.


Retirement Income

Replacing your earnings

Once you are no longer working you will need an ongoing income. Your retirement income may take the form of a pension from your superannuation. In the pension phase of superannuation, you are required to draw at least the minimum pension payment every year. This minimum is a set percentage of your superannuation balance
based on your age.

Some of your retirement income may also take the form of bank interest, rent from investment properties and/or dividends from shares. Where investments are owned outside of superannuation, the income from them, and any realised capital gains, may be taxable.

For those individuals who are eligible, the Age Pension provides a modest ongoing income after age 65 or later. The Age Pension rules require you to be assessed under an Income and an Assets Test, to determine both your eligibility and the amount of payment.

Finally, another potential source of income is a reverse mortgage where you borrow a lump sum against your home. The borrowed funds can then be invested to earn income.

A financial adviser can help you arrange your retirement income using some or all of the sources of income set out above.


Estate Planning

An overall strategy

This involves setting a plan to deal with your assets after you pass away. A carefully considered estate plan will ensure that the distribution of your assets is undertaken in accordance with your wishes, and can reduce the likelihood of conflict between family members and save tax.

A financial adviser can provide guidance on part of your Estate Planning needs, such as nominating beneficiaries of insurance and superannuation death benefit payments. However, an estate plan also requires the advice of a legal professional on the preparation of your Will, and a Power of Attorney so your affairs can be managed should you lose the capacity to do so. A legal professional should also be consulted in relation to Trust documents and any Company documents required for succession planning.

A financial adviser can assist you in identifying your Estate Planning needs.


Aged Care

Looking after the ageing

This is a specialist area of financial advice which requires the cooperation of a financial adviser and a legal professional. Decisions regarding your care as you age are often best determined early and in conjunction with family. At some point you should have a plan as to how long you and your partner will remain in your home - possibly with ongoing help at home or short-term support. This in home aged care help may be privately or Government funded (in full or in part). For Government funded support, you will need an assessment of your
individual case to determine if you are eligible.

If you or your family decide at some point that you will move to an Aged Care facility, you should seek legal advice on the contracts that will need to be signed as well as financial advice on any lump sum and ongoing
payments that need to be made. You may also give some consideration to the location, and type of facility you will move to, as well as the level of care you require.

A financial adviser can either assist you directly with your aged care advice needs or, knowing and understanding your situation, can direct you to other specialist professionals for advice.

From 1 January 2019 there will be restrictions on who can use the term “financial adviser”, “financial planner” or similar. Only persons who are entitled to use these terms under the financial services laws may do so. Financial product advice is regulated under the financial services laws. Financial advisers may be licensed to give you advice on some or all of these advice areas. Your financial adviser will provide you with information on their areas of expertise.

At Patersons our Wealth Advisers and Wealth Specialists are available to assist you with all of your advice needs whenever they arise.

Warning: This article is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate to your particular investment objectives, financial situtation or particular needs. Prior to making any investment decision, you should assess, or seek advice from your Adviser, on whether any relevant part of this report is appropriate to your financial circumstances and investment objectives.