Four crucial conversations you need to have with your financial adviser

OPINION: The decision to work with a financial adviser can be one of the most important decisions you make.

Who you choose to work with can mean the difference between retiring with ‘enough’ or being unable to stop working at 70. It may also make all the difference whether or not your reach your life goals. 

Contrary to popular belief, when you work with a financial adviser you don’t have to necessarily understand money – that’s the adviser’s job. There is, however, a great deal you can do to get the most out of the relationship.

First, start by choosing a financial adviser you feel most comfortable with. The greater the level of openness and trust between an adviser and client, the more effective the relationship is likely to be. Because every meeting with your adviser can be a step towards financial health, it’s important to partner with someone who understands who you are and what you want to achieve out of life.

Secondly, consider what you want from the relationship. Do you need support to improve your money habits and build your property portfolio? Would you like to draw up a retirement plan? Or would you like expert advice around protecting yourself from risk as you navigate through various life stages?

For each person the answer may be different. 

Lean on your financial adviser to help you establish good money habits, to perhaps get into your first home, and inspire you to grow your financial portfolio. Choose a financial adviser who has the knowledge, skill and competence to select the product most suited to your needs.

To help get most out of your financial adviser, and to get closer to reaching your goals, here are the four most important questions to ask.

Am I benefitting enough from my KiwiSaver?

There is a lot or jargon surrounding KiwiSaver which makes this important investment confusing. A KiwiSaver Scheme is quite simply the provider. The “fund” relates to how your money is invested within the scheme, and whilst there has been media spotlight on the disparity in KiwiSaver fees recently, the significant impact on your KiwiSaver will result from your fund selection and appropriate asset allocation.

Simply put, the fund you invest in is ultimately more important than the fees you’re paying. While no one likes to pay higher fees than they need to, the fund you invest your money in can make a huge difference to whether you achieve your short and longer-term goals. 

Many Kiwis are automatically placed in the default KiwiSaver fund, which has the potential to yield low returns. If you haven’t done so already, sit down with your financial adviser to review your current KiwiSaver Scheme and fund choice. By looking at factors such as your age, personal goals, income and appetite for risk, an adviser is in the best position to make recommendations ensuring you to make the most of your KiwiSaver investment which in turn will assist with your retirement goals.

In addition to this, if you have any superannuation accounts offshore, such as Australia, it is best to check in with your adviser as there may be tax implications and other factors to consider that may hinder your retirement goals.

Is my retirement ‘number’ enough for me to retire on?

Unless you’re able to comfortably retire solely on New Zealand Superannuation entitlements, which is highly unlikely for the majority of Kiwis, you’ll need to determine how much you will need to live on. 

Are your retirement savings enough and how long will they last? Ascertaining this all-important ‘number’ is no easy feat.

Work with your financial adviser to identify what a comfortable retirement looks like for you: ask yourself, “How old will I likely be when I choose to retire?”, “Where will I live?”, and “What lifestyle do I want to lead?”

Your financial adviser will start by helping you firm up that vision and will look at your current expenses and cash flow to ascertain if your retirement saving target is adequate.   

While retirement may not mean you’ll be sailing off the coast of France in your golden years, it may mean you’ll be stress-free.

The reality is that we don’t always understand how much we truly need to retire on, and we often don’t take into account higher medical expenses and or unforeseen events.

It can be a big wake-up call to realise that your vision isn’t realistic. However, a competent adviser will help you consider your options and work together on achievable retirement goals.

What are the biggest risks to reaching my financial goals?

As you move towards retirement, it’s a common misconception that you are assured of continuous income, especially one that will increase.

In reality, this may not be true – and a loss of income through illness, injury or redundancy are real risks during your lifetime requiring careful consideration. Life doesn't always go to plan.

Research has shown that a family is 49 times more likely to lose a home through loss of income than through fire*, and so it’s in your best interest to plan for such situations so that your financial goals are not sabotaged.   

Starting a family and going on extended maternity leave is another factor that could impact a household’s income. With this in mind, it’s important to plan for any ‘bumps’ on the financial road.  These are things that could jeopardise the financial goals you’ve been working towards.

Undertake a risk analysis with your financial adviser, and while you may not be in the position to cover all potential events, you’ll be able to put something in place to tackle your biggest risks.

Don't be put off by paying an insurance premium. It's one thing you hope to never claim on, but if something catastrophic does happen, such as a death of a partner, that one consultation with your financial adviser could be instrumental to your peace of mind during a tragic time and your quality of life in the future.

Am I doing enough to build my wealth?

Once your financial adviser understands your short and longer term goals, they will be in the best position to help you achieve them. As experts they will be able to ascertain which investment methods or options are most appropriate, and take into consideration your current debt, spending habits and tolerance for risk.

Your financial adviser is also well-positioned to find gaps or opportunities for wealth creation that you may have overlooked. Make your adviser part of your financial “A team” and tap into their professional and industry knowledge to create an effective wealth building plan.

Article by Emily Wheatley - Meet Emily

Emily Wheatley is a financial adviser with the Lifetime Group, and is based in Timaru. She has over 10 years’ experience in the financial planning industry, works with a wide range of products, and is passionate about helping client improve their money habits and grow their wealth.

A disclosure statement is available on request and free of charge.

*Research by Comminsure