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Wealth Creation Strategies for the Average True Blue Aussie

Thursday, February 05, 2015

 

Wealth creation strategies for the average true blue Aussie

When the average person thinks of wealth creation strategies they generally think of ‘financial advice’.  However, there is a fundamental flaw in the financial advice industry in that it relates very little real wealth creation strategies.  In addition, it is neither accessible nor comprehendible for the average Australian family.  So the very ones that need financial advice, the average Australian family, cannot access it or understand it.  Even those that are lucky enough to be able to afford very basic financial planning, aka wealth creation advice, find it overwhelming and not comprehendible because the very term financial planning is misleading. 

Wealth Creation Strategies Definition

So what is the definition of ‘wealth creation strategies’?  One financial dictionary defines it as Accumulation of assets (especially those that generate income) over a long period of time.

Let’s see if real wealth creation strategies actually relates to financial planning.  It is actually very had to find an agreed definition of the term ‘financial planner’.  However, a ‘financial plan’ is defined as  ‘a comprehensive evaluation of someone's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans

Yet when the average Aussie thinks of financial planners they generally think the person will be a highly educated and experienced professional that can assist them across all areas of their financial life.  Someone who can help them budget and save, then invest these savings in various investments including property, and also someone who will be able to reduce all the complicated financial strategies into a simple to understand no easy to implement plan.  However, this is not what happens when they see a financial planner. 

Financial Planners

Financial planners are basically product sales people getting paid commissions based on how much they sell. Worse still, some of them, are not highly educated at all, as a financial planning diploma can be obtained via internet based training courses. Some of these courses are quick and easy to complete and are more designed to make the supplier of the course money for course fees as opposed to ensuring a high quality financial advisor.  Financial planners also do not advise on property investing which is a key investment for financial wealth building and an investment that average Aussie wants included in the 'financial plan'.

Why is this such a problem? Clients want wholistic advice cross all financial fields. They want financial coaching that includes saving, budgeting, investing in shares, super, property, tax minimisation, asset protection, finance and more.  But each of these topics is dealt with by different professions.  A financial planner will sell you share or superannuation investments and convince you to take our high commission insurance policies.  But they won't help you invest in property.  An accountant may help you minimise tax, my even explain how to do this by investing in shares and property, but they can't actually advise on investing in such.  Mortgage brokers can advise on the best finance but can't advise on anything else. And the of course are the Property spruikers.  They will advise on property investing but they are generally unlicensed, uninsured and uneducated. They also get seriously high commissions on anything they sell you.  So can you trustee advice.  I think not. 

So why aren't their advisors who are licensed, insured, educated and experienced across all financial fields?  There are, but they are few and far between.  The difficulty for such advisors is the complications that the various governments have introduced via legislation that make it near impossible to give wholistic advice across all financial fields. 

Buying Property in an SMSF

Let's look at an example.  Say you want to buy property in an SMSF.  A very common and effective wealth building strategy at the moment.  Who do you turn to for advice?  If you see an Accountant they can set up an SMSF do you but they can't advise whether you should or shouldn't do so.  You can see a financial planner who needs to do a very complicated and expensive Statement of advice SOA to advise whether you should or shouldn't set up an SMSF.  The price of this Advice alone puts most clients off.  If you’re willing and able to pay for such and they do advise you to set one up, they can't actually set one up, you need to go back to the accountant for that.  Then you need to find a suitable investment property.  The financial planner and accountant can't assist you with this.  So you end up trying to hunt for one yourself and getting caught up with not so scrupulous real estate agents and property spruikers.  Once you find a property you need a loan. A mortgage broker can help you with this but the broker can't advise on whether you should do this and the banks require you to get advice so you are now back to the financial planner for another very expensive SOA to recommend you should take out a loan to buy the property.  Then you need an accountant to account for the SMSF accounting and taxation needs.

Does the process above seem overly regulated, overly complicated, overly off putting or is it just me that finds it ridiculous?  From my own experience what generally happens is that the wealthy who can afford the advice persist and get the right advice and grow wealthier.  The Average Aussie family can't afford the advice or even if they could, it just gets so overwhelming and complicated that they give up and don't get the advice they need to grow wealth.  And so, the divide between rich and not so rich continues to grow. 

So what is the secret to wealth creation?

Find a professional advisory firm that is licenced to advice across all financial fields.  A firm that can assist you create real wealth creation strategies.

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