The more you know about your money, the better off you are. But there are some things you don't need to know nor, unless you have a huge amount of spare time, will you be able to know.
It's like your health - when necessary you see a doctor because most of us don't have the skills to self-diagnose. With money matters you go to a financial adviser. But if you reckon finding a good doctor is challenging, finding a good financial adviser can be even harder.
The whole field of professional financial advice is reasonably new. Commissioned salespeople have been around for years, but it has only been in the last 20 years or so that qualified, professional advisers have started to appear in reasonable numbers. Unfortunately, some not-so-reputable advisers are still in business.
New legislation that cracks down on unscrupulous financial advisers was recently passed in parliament. These 'Future of Financial Advice' reforms will go a long way to improving the financial advice industry.
In essence, the changes are pitched at ensuring advisers put their clients' interests ahead of their own. Advisers will also need to make it quite clear how much their services will cost, and how you will be asked to pay, and you should be able to get simple, low cost advice if that's all you need.
These are worthwhile reforms because in today's increasingly complex world, good financial advice can make a tremendous difference to your wealth. Although stories of dodgy advisers tend to make the headlines, there are plenty of decent financial advisers who make a significant difference to their client's financial wellbeing, security and lifestyle.
A quality financial adviser can help you develop a realistic personal budget, draft a plan to get out of, and stay out of, debt, and steadily build a portfolio of investments that will help you achieve your long term goals. It can be especially helpful for those times when major decisions need to be made - for instance, when you're approaching retirement, if you've just gone through a separation or divorce, or if you've been made redundant.
Most importantly, good advice is tailored to what matters most to you. That's why any adviser you speak with you should first and foremost be interested in you and what you want from life rather than focusing on how much money you have to invest.
Finding a reputable adviser does require a bit of work. Ideally it will be a long term relationship, so be prepared to spend some time speaking with several firms before you settle on an adviser you feel comfortable with, and who has experience with situations similar to your own.
You could contact the Financial Planning Association (www.fpa.asn.au) for a list of qualified advisers near you, and I'd also be talking to friends and colleagues for recommendations.
Before meeting with an adviser it is worth having a few ideas of your own about investing - after all, the person who cares most about your money is you. A useful starting point for some background information is my free e-Book 'Ten keys to successful investing', which you can download from www.paulsmoney.com.au. The website also features a section devoted to choosing an adviser.
Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.
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