This is an update to a blog posted nearly 2 years ago and the issue is still being discussed, but in relation to finding a Financial Planner what does and should matter to you, the client?

The topic of fees versus commission was written about by every financial columnist over the past 2 – 3 years, but more so during the height of the Global Financial Crisis.  The call being for fees to be the method of payment – by the client, and commissions – payable by the product provider being stopped. 

In a nutshell financial advisers receive payment from their employer, the client, through either commissions or by charging a fee for the service provided. The fee may be fixed or based on an hourly rate, or a combination of both which is used by many financial advisers. In reality the client pays the commission – the product provider will recoup this amount from the fees they charge over time anyway.

So what should you look for in terms of fees when seeking out a financial adviser?  There are plenty of independent websites and organisations that can give you tips and advice, so look around and do your homework.  But what’s important here is that consumers should be given a choice.  Not all consumers want to pay fees for services up front and are happy to pay adviser fees in the form of commissions. 

Providing clients are kept informed of commissions and fees, such a strategy may suit a client.  The down side is that advisers may be influenced to recommend investments with higher commissions and the client may not always be told of alternative investments that may be equally as good with lower fees.   An adviser may also continue to receive trail commissions even if a client chooses to no longer use their services but retain their investment.  However recent changes to a number of product providers means that the client may be able to turn off trailing commissions where there is no service being provided - this is a great thing for consumers.

When engaging an adviser who charges a fee for service, make sure you discuss and agree on the costs to be charged.  Charging directly for a service is a good incentive for a planner to give good advice and service but costs come straight out of your pocket and are often charged in advance.

While there will always be a debate of the pros and cons of commission versus fees, scrapping commission completely from the industry removes the right for consumers to choose.

The true issue is transparency.

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

It’s good to see many of the younger generation are out there working and learning about responsibility. Some of today’s teenagers however are earning a sizeable income with Australian Bureau of Statistics showing year 12 students are today receiving an average of $245 a week.   That’s a far cry from a few bucks earned from Dad for washing the car back in my day.

I’m not sure why the Y generation isn’t called the I generation given the amount of i-gadgets and i-gizmos in the market place, but regardless of whether you think they are the “Y” or “I” generation, a Commonwealth Bank survey[1] found many of these young Australians have no plans to save or budget, yet most of them still plan to buy a car or go on an overseas holiday. 

What’s frightening is that nearly three quarters of those surveyed had some form of debt, with around half not concerned about their debts stating they do not let the amount of debt they are in affect their daily lives.  While the easy availability of credit is causing some problems, it seems that mobile phones consistently seems to top the list for causing debt.  It makes you wonder how important those gadgets are …. but I digress.

The good news is that young people are keen to learn about managing their money.  The report Financial literacy: Australians understanding money by the Financial Literacy Foundation noted that the majority of teenagers want to learn about budgeting, saving and managing debt and see leaving school as a significant milestone in which they can start gaining control over their finances. 

So if you have a significant young person in your life, or you happen to belong to the Y generation, it’s never too early to start down the path of managing money.    Start surfing, web surfing that is, because there lots of great websites full of ideas and practical tips that set young people on the right path to managing their money.   The Financial Planning Association for example has created Dollarsmart, a web based and CD financial toolkit for teenagers to help improve their financial skills and give them confidence when dealing with financial matters throughout their life. 

It might also be of use to start looking for a financial planner who can help you on the road to accumulating enough assets so that you get to decide when work becomes optional.  A good place to start is with the planner your parents use, check the websites and make a few calls, it could be an excellent investment for you to make.

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

Sometimes called nursing homes, it’s not until you are faced with helping a person make the transition from independent living that you actually appreciate the complexities and mystery that surrounds what I think is one of the more complex areas of financial planning.

You see when a person makes the decision (or in some cases has it made for them) to move into a facility, the actions they take in that process can have a number of financial impacts.  These depend on the level of care the person needs – whether a bond has to be paid, what daily fees etc will be paid.

This is an area that you really should talk to your financial planner about before embarking on this path.  This is not what I wish to cover today.

One of the hardest things it seems to me is the decision for a person to go into aged care.  What really hit home for me was that after 40 years plus living in the one house, this lady had two days to pack up her memories and make the shift from independent homeowner to aged care facility resident.

Leaving a house of possessions and memories and moving into a bedroom (the facility is new and quite nice, but still after 4o years in your own home….) can be a major shock to the system in itself.

But let’s get back to the 2 days issue.  This decision was really a few years too late.  There have been a lot of family arguments about the family house, who gets what and how it’s done.  Brother is against brother and its all getting messy.

The solution – family communication. This is easier said than done, after all it’s just not right for a child to ask their parents about their financial situation, or is it.

This is a conversation all middle aged children need to have with their parents – who gets what, when the plug gets pulled and at stage of life do we make the move from independent living and on what terms and conditions.  Ignore this conversation at your peril – it’s only a matter of time before you have to act.

Finally go hug your children, tell your parents you forgive them for your childhood (only kidding), life is fleeting and as this lady said to me, those 40 years have gone by so quickly and the decision to move had to be made so fast that they couldn’t say a proper goodbye to all their friends in the area.

Make sure you and yours don’t ever miss the chance to say goodbye.