We all know that the future is uncertain. When we look at the present economic conditions prevailing around globe, this statement looks even truer.
Financial planning is important for every one of us. Be it debt planning, personal risk planning or investment planning, sound financial advice can help you in big way to increase and protect your wealth. The financial success does not depend only on great income, but also on sound financial planning.
The financial markets are fickle. To achieve higher returns, you need to take more risk. Everyone will like to turn $10,000 investment into $100,000 quickly. But there will be very few who will like to take a risk of losing this $10,000 in pursuit of multiplying these by 10 times. So your expectations must be realistic. It is also a fact that without taking risk, we can do nothing.
In the words of Evel Knivel, a motorcyclist stuntman, “Risk is good. Not protecting your risk is a dangerous leap” (source: AMP Capital Investors’ magazine for advisers and investors.
Though no financial adviser can give you fool proof advice, a good financial adviser will try to minimise the risks for you by gaining an understanding of your particular financial situation, by understanding your income earning capacity, by understanding your risk profile, by understanding your risk absorbing capacity, by understanding your particular financial goals. To be in a position to give you better advice, the financial advisor needs to be provided with full financial information.
A Financial Adviser can help you give a direction for future so that you can manage your debt in a better way, have optimum tax structure, have good asset protection structure, make best use of retirement investment opportunities provided by your employer, maintain adequate liquidity and having adequate protections in place to ward off any adverse financial circumstances.
Even if you think you know about finance, you cannot beat the advice of a good financial adviser.
With effect from July 1, 2011, the Financial Advisers Act has come into effect in New Zealand. Under this Act, there are three types of financial advisers.
The Registered Financial Advisers (RFAs) can give you advice only on category 2 financial products.
Then there are advisers who work for Qualifying Financial Entities (QFEs), these are companies like banks and insurance companies. These are the advisers who can give you advice basically about the products their employers sell and cannot give you advice in respect of category 1 products sold by other companies/financial institutions.
The third category of Advisers comprises those who can give you advice on both category 1 and category 2 products. These are Authorised Financial Advisers (AFAs). If you are looking for complete financial advice, then these advisers are most suited to you. Of course, you should choose an AFA who has got sound and up to date knowledge of financial products. Ultimately proper knowledge and proper guidance greatly enhance your chances of financial success.
Ravi Mehta is an Auckland based Authorised Financial Adviser (AFA) and can be contacted on ravi.mehta@pfsl.co.nz. A disclosure statement as required under Securities Act 1988 is freely available on request.