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When self-help is not a one-person job

Posted by Sean O'Kane & Neal Durling on 22 February 2019
When self-help is not a one-person job

There are times in life when you're better off not putting your head above the parapet, for fear of losing it. And so, with this in mind, it's perhaps no surprise that financial advisers have been largely silent in the wake of the Royal Commission.

While we feel some of the proposals in the final report may have unintended consequences if fully implemented, we feel that in other areas they may not have gone far enough. It's against this backdrop that Scott Pape's book, The Barefoot Investor, has stayed on the best sellers' list - not surprising given the absence of the FP industry having a voice. This has got us to thinking:

  • What is advice and why should clients not just read the book and do it all themselves?

We should show our hands here and disclose that not only have we read the book, but much of what he says closely aligns with our practice's advice philosophy. But we do think it's worth posing another question:

  • How many self-help / all-you'll-ever-need books do you have on your bookshelf?

We have everything from how to lower my blood pressure and chi running, to building your own home and we probably don't need to tell you it remains a work in progress.

  • So what's our point?

If, like us, you're a seeker of knowledge, believe you're a successful self-starter and reasonably disciplined, you buy these books with the intention of reading and understanding, but don't get around to the implementation. Usually, it also becomes apparent that it's more complicated than you first thought, that there are many options, or that it will take significant time, so the book becomes an interesting, but ineffective read.

  • So, is planning and coordinating your entire financial future as simple as it seems?
  • Is a one-size-fits-all approach right for everyone?
  • Is the increased risk of doing it yourself worth the money you're saving?
For some it might be, but through the next few articles we'll explore some of the key benefits that the right personal advice relationship can bring.

In the meantime, below is our advice philosophy, which outlines what we think a good advice relationship looks like.

Our Advice Philosophy

The main reason to seek financial advice or invest in a financial plan is not about having more money, but rather about enabling your finances to help you facilitate the life you want, now and into the future.

A good financial plan, therefore, always comes back to how it achieves this ultimate goal, without any surprises along the way.

This is why we spend a lot of time understanding our clients' goals, and how these evolve over time, to ensure our advice is directly in line with what you want out of your life, now and into the future.

Put yourself in the driver's seat

When it comes to your money, it's crucial that you're in control. It sounds straightforward, but for a lot of doctors this is not the case.

It doesn't need to be complicated, but you need to be on top of the basics knowing what you have coming in, what's going out, and then what you're left with.

Without this knowledge, it's very hard to make any sort of financial plans with confidence, and it's impossible to create financial independence if you consistently spend everything you earn.

Protect what you create

Insurance underwrites the risk of something going wrong while you're building your assets.

You are, and will continue to be, your most valuable financial asset, so we ensure all of our clients have comprehensive cover in place before embarking on creating wealth.

Investing in a comprehensive protection strategy is a positive step, as it ensures there are no surprises, and as your wealth builds and you become more financially secure, you can reduce your cover.

Own your lifestyle, don't borrow it

When money starts coming in, it's easy to get carried away living a lifestyle that's financially unsustainable, supported by borrowing.

It's never been easier for doctors to over-spend, as a result of a combination of low interest rates and over-generous lending by banks.

Just because you can borrow money, doesn't mean you should - having lots of debt will cause stress, restrict your choices, and limit your ability to invest and build funds for financial independence.

Having some debt is a part of life, but it's important to understand the opportunity cost of this and make decisions in the context of your overall situation and objectives.

Make informed financial decisions so that you can enjoy your money

Our strategy is to financially model your position, including all the lifestyle assumptions you wish to make, which means we can therefore predict, with reasonable accuracy, how your financial future will look.

Our advice, combined with all big financial decisions, are entered into the model so the implications of changes and decisions are known before you make them.

This process will allow you to have confidence in your finances so that you can enjoy the money you've worked so hard for.

Get the structure right

Restructuring assets can be a costly exercise, so it's important that we focus on buying assets in the correct entity, from the outset, whether that be in your own name rather than a trust, or super, or vice versa.

We help our clients understand the implications of different structures before any asset or investment purchases are made.

Make time your friend

The impact of compounding returns on investment is exponential growth, so we're big advocates of getting clients to start investing early.

$50,000 invested with an 8% return after 10 years is worth $108,000, after 20 years $233,000 and 30 years $503,000.

See where the money is made?

A long-term relationship

Your finances are a part of life that should always be a focus, no matter what stage of your life or career you're in.

This is why we aim to build long-term partnerships with our clients and use a structured ongoing review process to ensure you have the highest probability of achieving your financial goals.

We use our relationships with our clients to offer ongoing advice and financial coaching to enable you to be accountable for the plans we've made together.

Author: Sean O'Kane & Neal Durling
Tags: Financial planning

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

The financial planning services are provided by Medical Financial Pty Ltd trading as Medical Financial Planning (AFSL 506557)