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.
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?)