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Financial Advisers: Your Partners in Wealth (Part One – The Foundation of Smart Investing)

In a world filled with financial challenges and uncertainties, having a trusted financial adviser makes a significant difference in achieving your long-term financial goals. As we navigate through the spectre of a global recession and rising inflation in 2023 and beyond, the importance of financial advice has never been more evident. Just three years following the height of the COVID-19 pandemic, we find ourselves in a cautious economic environment, where investors are tested for their resilience.

In Australia, people have increasingly turned to their financial advisers for guidance, not only in practical matters (e.g. investment management) but also in navigating the emotional aspects of financial management such as Aged Care planning. This relationship has proven to be valuable not just when markets are down but also during the times when assets flourish, boosting portfolio gains.

In this three-part series, we are going to explore a couple of key reasons why it is critical to engage a financial adviser, and the functions they serve to help you grow and protect your wealth. First up, it’s an adviser’s role in laying the foundation for smart investment strategies.

Asset Allocation – Dividing Your Money Appropriately

When it comes to growing your money, the way you divide it up is incredibly important. Imagine it’s like building the foundation of a house – it’s the base that holds everything together and has a leading role in determining your financial strength, even before you pick which specific things to invest in.

But here’s the catch: most people don’t give it enough thought, with many focusing on individual stocks and dreaming about how much money they can make, often forgetting that the real driving force of building wealth is how a portfolio is divided amongst different asset classes.

DIY Investing and Potential Pitfalls

For those looking to do it themselves, there are two approaches to take. First, there are those who don’t pay much attention to asset allocation – they pick a one-size-fits-all option offered by their retirement fund, without really thinking about what suits them best. Then, there are those who are more hands-on. They like to put together their own mix of investments, but sometimes don’t fully understand the risks they’re taking. Here’s where getting some expert advice can be a game-changer.

Take Emma, for example. Her financial adviser looked at things like her age, what she wants to achieve with her investments, how much money she already has saved up, and her broader lifestyle goals. After setting the scene, her adviser suggests that 80% of her money should go into investments that can grow over time.

Should Emma follow this advice, she could see her money grow by about 7.8% every year for ten years. That’s better than just leaving it in a standard retirement fund, which might only give her a 6.6% return. In dollars and cents, that’s an extra $210,947 in her pocket after ten years, all because she didn’t go with the default option.

Leverage Your Adviser’s Experience

If you try to figure this out on your own, you could quite easily and understandably make some mistakes that cost you money. It’s like trying to be your own chef without knowing how to cook. Investing can get complicated, with world events over which you have no control affecting your investments. That’s where advisers come in handy – they keep you up to date with investment options favoured by large institutions, like private debt and infrastructure, which many everyday Australians might not know about.

“Safe” Assets vs. Smart Investments in Your SMSF

The Australian Taxation Office (ATO) says that lots of people who have a Self-Managed Superannuation Fund (SMSF) keep a large percentage of their money in cash. Cash is safe, but it doesn’t offer anywhere near the same growth potential as a tailored investment plan. To give an example, take Alex – he holds more than 70% of his super in cash and other “safe” assets. If he engaged a financial adviser, he might learn that putting his money in a mix of asset classes that can grow could make a significant difference to his super balance – potentially to the tune of 5.7% growth in one year rather than a measly 4.3% over ten years.

The key takeaway here is that obtaining advice from a financial adviser to determine the best way to split up your money can make a big, positive impact on your financial future. It’s like having a coach on your financial team, helping you score big with your money.

McKinley Plowman: Your Partners for Life

Financial advice goes far beyond just investing. It encompasses a profound understanding of taxation, social security, and human behaviour that plays a crucial role in shaping life decisions. Particularly over the past few turbulent years, financial advisers have well and truly proven their worth.

In a world marked by economic uncertainty and geopolitical tensions, McKinley Plowman’s financial advisers provide support through volatility, allow you to develop and adhere to planned investment strategies, and navigate the complexity of your financial life. If you’re ready to see how we can help you achieve clarity and financial independence, please reach out to us today on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or via our website.

written by:

Financial Adviser Justin McMillan has been with McKinley Plowman for several years, following our acquisition of his practice Smartwealth. He firmly believes that while financials, investments, and strategies are important in an individual's financial plan, they are simply the vehicles to allow clients to get where they want to be. Justin takes a holistic and rounded approach and focuses on the individual, taking the time to listen and understand what drives and motivates his clients.

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