Why paying for financial advice can leave you with more in your pocket

Want to get richer? With a little bit of help from a professional, we can all make more from our existing income and retirement plans - around 5% more each year, according to one report.

By Allison Tait

We all know retirement and superannuation planning can be confusing. 

The days of retiring with a paid-off house, a schmick car and entitlement to a decent Age Pension are long gone.

Australia’s retirement income system means most Australians will rely on a combination of our super and - maybe a few years later - a government-funded Age Pension and other benefits, cards and concessions.

While 63% of Australians rely on government income support today, that number will dwindle as more of us stash money into our superannuation.

And that’s why personalised financial advice still has a role to play in putting more money in average people’s pockets.

The problem? You now have to pay upfront for personal financial advice and most of us don’t do it until it’s too late for us to benefit from it. Even worse, we don’t do it at all, deciding that the budget won’t stretch to paying thousands of dollars for financial advice.

Most of us don’t bother with professional advice - and are poorer for it

In May 2023, Findex published its ‘The Cost Of Doing Nothing When Preparing For Retirement’ report, which surveyed 71,000+ Australians and discovered that the reasons why we don’t seek professional advice include:

• We’re happy looking after our own finances (24% of respondents)

• We don’t think we earn enough, or have enough, to make financial advice worthwhile (30%)

• We’re concerned about how much financial advice might cost (30%)

The survey also found that ‘doing nothing’ is potentially costing Australians millions of dollars in retirement income. And, mostly, what stops us from seeking financial advice is simply… procrastination.

Why bother paying for a financial adviser?

 The truth is good financial advice can change your financial future. 

Research from global investment management firm Russell Investments suggests that Australians with a financial adviser were 5.9% better off each year than non-advised investors.

“Given all the rules around super and pensions, the transition to retirement can be a complicated and sometimes stressful time financially,” says Dr Shane Oliver, Chief Economist and Head Of Investment Strategy at AMP. 

“Short of trying to work it all out for yourself, a financial adviser who can take account of your personal situation is well placed to help with this and provide comfort that, financially, you are on the right path.”

When personal advice is worth it

Financial advice can help if you’re lying awake at night asking yourself questions like:

•Will I have enough to retire? 

•How much should I draw down from my super and from what age? 

•How do I best arrange that drawdown? 

•Can I get a part Age Pension? 

•What sort of investment strategy is best during retirement? 

When people with expertise and experience like economists have their own financial adviser, then surely it’s worth thinking about.

“Economists or investment professionals like me might know all about economies and markets but we are not experts in things like the rules around super, estate planning, insurance, how best to structure our investments etc,” says Oliver. “So it made sense to me to have a planner.”

But what if you don’t think you have enough money to make it worthwhile?

If your super balance and income are low-to-middle for instance, will paying for personal financial advice get you more money in the long run?

“There would be some people for whom a financial counselling service might be suitable,”  says David Sharpe, Chair of the Financial Advice Association Australia.  For example, people who might be struggling to pay down debts that are larger than their superannuation stash might benefit from aggressive plans to use Australia’s financial hardship provisions to get on top of their finances.

If you’re unsure, it’s always worth asking the question.

 “As advisers, we have a code of ethics and part of that is to ensure that clients get value from what we advise,” says Sharpe. “We have to be transparent that if we don’t think we can give a client value, we tell them upfront and don’t take them on.” 

When to consult a financial adviser 

While everyone knows that the best time to start planning your financial future is ‘early’, the very best next time is ‘now’.

“We get a lot of clients aged around the mid-50s,” says Sharpe. “They’re in the final sprint, 5-10 years out from retirement. Often the kids have finished high school, the mortgage is reducing and that’s a trigger for ‘how do we make this happen?’, and it’s a good time to start planning.” 

The type and cost of financial planning advice varies. Read more on how to find the right financial advisor for you.

If you’re retiring with a mortgage, as an increasing number of us are, you’ll need to factor in how much of your super will pay off the mortgage – and how much you’ll have left to provide you with an income.

Are you better to be throwing money at the mortgage right now, or tucking it away into super? How might it affect your entitlement to the Age Pension? Read more on Calculating Retirement below:

And if you’re renting your home, then according to Super Consumers Australia, you’ll need up to 3 times as much in superannuation.

Getting a clear picture of how your housing choices impact your retirement finances is just one way a financial adviser can help you.

An adviser will also take into account your health and lifestyle choices (along with something grim called 'Australian Life Tables' – what kind of retirement do you want to enjoy – and your current financial situation to help you figure out how to reach your goal.

You may not need as much as you think you might if your dream retirement involves holidays in Australia and a fishing boat.

If you aspire to an overseas holiday every year, however, you may need to think bigger (and consider paying for a professional to help you). 

^{Advice given in this article is general in nature and does not take into account your personal circumstances. It is not intended to influence readers' decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.}