Financial Planning Advice for Employees

Financial planning advice for employees is just as important as it is for any wealth accumulator concerned about the security and effectiveness of their investments. In this article you will read about the importance of financial planning advice and situations that should trigger a review of your circumstances. It becomes obvious that superannuation is a critical asset for most employees – and their families. This article also considers what can be done to ensure that superannuation accounts are invested appropriately – and that other wealth assets are protected in the process.

Employers can reap benefits from facilitating access to financial planning advice through the workplace: a secure and happy employee is more likely to be a loyal, long-term employee.

What does financial planning advice include?

Effective financial planning encompasses financial situations for all stages of life. Notable inclusions are –

• asset accumulation (a savings phase during which wealth is accumulated);
• asset protection (adopting strategies to ensure that accumulated wealth retains its value in most circumstances.);
• lifestyle budgeting (considering the need to balance immediate needs with future goals. Keeping current expenses lower than income, leaving some to accumulate to satisfy future needs, is important.);
• estate planning (documenting what will happen to accumulated assets in the event of the owner’s demise. It is designed to ensure that loved ones are financially provided for in a timely and adequate way.); and
• retirement planning (developing strategies to ensure that a comfortable lifestyle can be independently funded, for the duration of the retirement period.).

Whilst these stages are applicable to most employees, too many of them rely on their superannuation trustee to manage their largest financial asset. They do this despite the fact that the trustee knows nothing about them or their financial circumstances. Superannuation trustees are only able to provide financial planning advice for employees to the extent that it relates to their superannuation account.

What financial planning advice is available for employees?

Whilst a significant portion of the Australian population now has a superannuation account (many with more than one), only very few of them take any interest in how their superannuation account is invested. Some statistics say that fewer than 25% of employees take any effective interest in their superannuation account. Fewer than 5% actually engage with their account trustee! Most leave the management of their superannuation investment to a default position determined by the trustee.

Employee superannuation accounts are only one element of wealth accumulation and management. If you hold such an account you may be unaware of the default settings on that account. You may see that there is life insurance in the account, but do you know if it is adequate? If the amount of cover is adequate, will the definitions of the policies allow for a claim to be paid in a time of need? You can see that you have an account balance – and that the account has earned a particular rate of return. Do you know whether the assets in which the account is invested, are appropriate to your investor risk profile? (Do you know what your investor risk profile is?)

Employers may be interested to read the article published on our Blog page under the title, Business superannuation an employee benefit.

In an article published in The Sunday Mail on 5 February 2012, the Head of Financial Advice at Sunsuper had the following statements attributed to him (The words in brackets in the quote below have been paraphrased by the author of this article):

• I would just caution people to call and talk to someone who isn’t emotionally involved before they (reduce the risk-based asset allocation in their accounts);
• We can stop people making mistakes and reacting to adverse market conditions and also provide guidance and recommendations to people when they are looking at these decisions; and
• All our research indicates that people who receive comprehensive (financial planning) advice early on are better off in retirement than those who do it themselves and those who leave it to much later.

Whilst Patrick White’s remarks as paraphrased above were directed specifically to the superannuation aspects of members’ financial positions, we certainly support them. We enhance their intent by encouraging employees to seek comprehensive advice regarding their personal financial goals and aspirations.

What financial planning advice is beneficial for employees?

Financial planning advice for employees should be sought in a range of circumstances. For most people the key financial life stages at which financial planning advice should be sought, are –

• commencing a new job/ income stream;
• acquiring/ accumulating substantial assets;
• incurring debt;
• establishing/ changing life partnerships/ adding children; and
• accident/ illness diagnosis.

Does financial planning advice for employees, relate only to their superannuation account?

The key wealth management/ financial planning strategies that apply to the above circumstances are:

• investment strategies (cashflow management; debt management; and investment asset allocation);
• personal risk strategies (insurance to protect the source of income; and to provide for goals not yet achieved);
• estate planning strategies (ensuring a valid and well-considered Will and relevant powers of attorney are in place to ensure care for the disabled; and for survivor beneficiaries – especially once spouses and/ or children are involved); and
• retirement planning strategies.

Superannuation accounts can be used effectively in managing at least some aspects of the investment strategies. As intimated above, personal risk insurance (life insurance) can be taken out in superannuation accounts. This is an area where care needs to be taken and a proper understanding formed, as to what cover is in place. In appropriate circumstances, insurance within superannuation can be linked to a personally held policy and the premiums paid proportionately from the superannuation account and from personal financial resources.

Whilst superannuation accounts form part of the solution in the above cases, it forms part of the asset base to be resolved in the case of estate planning  and retirement planning.

How can financial planning advice for employees be accessed?

Continuum Financial Planners Pty Ltd is a privately-owned financial planning advisory firm offering personalised, professional wealth management advice that is tailored to the individual needs, goals and objectives of investors generally. This includes members of employee superannuation funds. Our experienced advisers work to the mantra that – ‘we listen, we understand, we have solutions: and we care’. To access these caring services focused on your best interest, please call our office (on 07-34213456), or complete the website Contact Us page, following which you will receive a prompt and courteous response.

Our advisers can meet with you on a no commitment, no fee basis to determine whether we are able to satisfy your particular needs. If so, you can engage us on a fee for advice/ fee for service basis. In many cases any agreed fees can be paid from the member’s superannuation account.