CHECKING YOUR FINANCIAL PLAN

There are a number of safety checks to consider when evaluating a financial plan. Take the plan home and read it carefully - and jot down any issues or concerns that you come across.

1. If you feel a bit uncomfortable with the adviser, deal with it immediately. If you can't, forget the plan and change advisers because the situation won't improve.

2. If all your money is directed into one investment. Diversifying across different assets (property, shares, fixed interest), different fund managers and different products can reduce your risk. If you only have a small amount to invest (say less than $10,000) then one investment may be acceptable

3. If you'll be investing in only one company's products. Get the adviser to explain in writing, whether there are some alternatives available at cheaper prices.

4. If the investment advice is weighted heavily towards one asset class over another. A heavy weighting in shares or property might suit an investor looking for capital growth, but may not suit those depending on regular, secure income.

5. Investing in shares or property when you will need access to your money in a year or two. Shares and property are usually 5-10 year investments, and can experience capital losses, in the short term (1 - 2 years). If this is a concern, ask your adviser for a response in writing.

6. The plan doesn't include emergency cash. For example, you might have a young family and need quick access to some of money for those unexpected events that can occur when children are involved. Reject any plan that leaves you without an emergency cash slush fund.

7. Does the plan focus too much on tax minimisation strategies? Look first at whether the investment suits you before worrying about tax strategies that are often expensive and risky

8. If the financial plan suggests using borrowed funds to buy an investment, ask the adviser to explain in writing the extra risks involved.

9. Make sure the financial plan explains the penalty charges (if any) for exiting an investment early. Get the early exit costs in writing.

Ask for a written plan
Factors that might affect your financial plan
Video
Value Matters - A Crossroads for Australian Equities
At last year's Advisers Big Day Out, Lazard Asset Management's Dr. Philipp Hofflin outlined his concerns over the sustainability of residential property prices and the sensitivity of the major banks ... Watch video
Centrepoint launches new advice partnership
24 November 2017, 12:35pm
Centrepoint Alliance has established a community of high performance advice firms comprising practices with aligned views on innovation and success. Read more
Link to something 49mqhSNM