And one of the great challenges facing the financial planning industry as it looks to build trust and professional standing is to demonstrate the value of using a financial planner versus going it alone.
For the vast majority of investors the value of getting professional advice is anchored around the process of investing – whether it be which funds or shares to buy through to the portfolio construction and asset allocation approach.
But there are considerably more strings to the bow of a professional financial adviser and it can take in areas like estate planning and life insurance and even issues like aged care arrangements.
The interaction of the tax and social security systems can become highly technical quite quickly. For example from July 1 this year significant changes around aged care will take effect.
These changes include:
- Income testing arrangements for home care packages
- Changed means testing in residential aged care
- New accommodation payments arrangements for residential aged care
- Removal of the distinction between high and low care in residential care
When people are working with a financial adviser it is about their personal situation and retirement needs so naturally a lot of the focus is on financial adequacy – the how much is enough question. But as members of the baby boomer generation know all too well care arrangements for ageing parents can quite quickly become the responsibility of the family once health deteriorates and independent living is no longer realistic.
Navigating the rules and regulations around nursing home bonds – much less the stress of selecting the home itself – can be a minefield depending on how a person’s affairs are structured. Certainly the biggest financial impact from the July 1 changes is likely to flow from the new means testing arrangements.
While some planners strategically focus their business on the investment and asset allocation part of the process and choose to leave technical issues around social security to others there are many who have a strong focus on social security impacts.
This is one of the great challenges in the pursuit of financial advice – finding the right adviser to suit your needs. And while we are waiting to see the final shape of the Future of Financial Advice (FOFA) reforms the onus is very much on the individual to understand the skills, educational background and technical competence of their adviser.
In that regard it is worth having straightforward conversations with any potential advisers about their training, their areas of specialty and professional qualifications – eg an SMSF specialist – and also what resources they have available to support them on technical issues that concern you personally whether that is pension eligibility or specific points like the aged care changes.
Written by Robin Bowerman, Principal, Market Strategy and Communications at Vanguard Australia.