Plan now for the future

THE turn of the economy and the mention of a recession is enough to send a shiver down the spine of Australians looking to secure their financial future. But it doesn’t need to be this way.

The crash of 2008 bought an end to the bull market bliss and people turned to extreme measures pulling hefty sums from their investments in a sudden split of panic. But financial experts attest that now, more than ever, is the best time to invest.

Julie Dolan, director of the planning division at WMS Financial Solutions, compares the market cycle to a grieving process.

“We’ve been through a grieving process, like a death to the financial scenario,” she says.

“It has been through the shock, the denial, the anger and they’re back to more the acceptance, but acceptance that is still bringing a little adversity on when to bring it back in. It’s still very much an emotional rollercoaster for investors, but they need to get past the emotions to look at the quantitative aspects of the market.”

For most, the change in the market was anticipated and they believe a correction will soon follow.

“They understand that markets go in cycles and they understand that markets will recover and that it is a good time to consider investing,” says Dolan.

Peter Gwynne from Financing Property believes there will be neither more demand, nor a massive drop in demand for financial planning for the average Australian.

“Realistically, if someone has a secure job and has their debt in control, the day to day impact of the financial crisis is not a major concern in their minds,” he says.

“We’ve seen major cuts in interest rates so the average family who have minimal market linked investments are actually better off than they were two years ago.”  

But he does believe financial advice will be more valuable to those considering retirement in the near future.

“Where we are seeing an increase is with people who were considering retiring now or in the very near future. For these people advice is much more valuable and relevant,” he says.

 Financial planning and advice has been heavily scrutinised in the media and publicly shamed businesses such as the embattled Storm Financial casts a negative glow on the industry. The legitimacy of the trade can be testing with so many competitors vying for the same clients.

But according to Dolan, the Storm Financial business model had been in decline for a while.

She says the model of the failed planners relied heavily on gearing and the lack of safety nets meant the market crash caused a crumble of everything associated.

“The strategy that Storm was promoting has certainly been on the decline for the last two years,” she says.

“I don’t know of any financial planner that recommended that strategy in recent times. In my knowledge there was nothing radical about their business model, it was their advice that was the issue.”

Dolan believes the downturn has actually been good — a positive for the industry in that it weeds out the bad seeds of financial planning. In a sense, it has legitimised the trade.

“Good financial planners take it as a holistic approach and look at every aspect of your financial affairs. It is also very much the behavioural finance aspect of investing, so making you understand your behavioural aspects, your behavioural personality for investing and then tailoring your goals and objectives to your actual behavioural needs. It’s not only a quantitative approach to financial planning, it’s qualitative as well,” she says.

Gwynne agrees, saying it is difficult to judge a financial planner’s ability on face value alone.

“A client doesn’t sit with a financial planner during the initial training process, nor do they attend the multitude of meetings that we’re required to be a part of to ensure we’re kept up to date with current trends and legislation,” he says.

“What the client can see is the person sitting in front of them. A good financial planner will have all of the relevant qualifications and will be able to produce them at the client’s request but realistically the client judges the planner on their ability to explain difficult concepts in understandable terms and their ability listen to the client and respond appropriately.”

Finance specialist Theo Shapiro, says those investors looking to get into the market should do so now.

“The market is at a bargain. The figures are very compelling at the moment because of the amount it’s come down by. This is a one in 20, 30-year opportunity in some respect,” he says.