Some Good Advice?

There I was feeling a bit sorry for myself after a conversation with friends over their disillusionment with financial advisers and lo and behold, the day after, there in black and white in an article on perceived ethics and honesty of various professions, my suspicions were confirmed.

Only 25% of people believe financial planners are ethical and honest. Above car salesman, State MP’s and talk back radio announcers but way below nurses, teachers and engineers. Sheesh, even lawyers clocked up 36%!

Am I surprised? Not particularly. Most people I meet can rattle off a bad financial adviser story quicker than you can say Storm Financial. But it’s just so…disappointing.

The Future of Financial Advice (or FOFA for those in the know) reforms the government has legislated will go a significant way towards enforcing advisers’ fiduciary duties and improving transparency of fee arrangements, but work on the soft skills of both adviser and client might make some difference to the bad rep financial advisers have in our community.

The relationship with your financial adviser is no different from any other intimate relationship you have. Hell, most of them know more about your personal and financial situation than friends or family.

At a core level, it’s two human beings interacting and making decisions to help reach your financial goals. Both parties bring differing perceptions, needs and personality styles to the table during the course of the relationship.

The reality is that we only control our side of the interactions. Before blaming others for a relationship’s deterioration, shine a light on our own behaviour.

So, today, I give you my 3 Essential Skills to Improve Your Relationship with Your Financial Adviser.

• Set Expectations

Spell out what you want and expect from the adviser-client relationship.

As a legal requirement you will receive a Statement of Advice detailing your current circumstances, goals and the plan the adviser has put together to achieve those goals. Don’t just file it away never to be looked at again. Go over it until you are clear what you are signing up for.

Even if you end up sounding like the proverbial broken record restate your understanding of the arrangement. For example, “So, for x amount of dollars invested I will be paying x amount of fees and for those fees I will be entitled to an annual and semi annual review and am able to call you on issues as they arise”.

• Develop Empathy

It’s intriguing to me that some people have few qualms about spending money on say, a massage for an hour for $150, but charge people that rate per hour for time spent on the highly important area of say, YOUR FINANCIAL FUTURE and it’s all resentful mutterings under the breath.

Appreciate that financial advice takes time and costs money. There is time spent on formulating advice beyond what is talked about in client meetings plus time to complete administration and requisite paperwork. The person providing advice is a qualified individual who is entitled to charge for their time.

Also, believe it or not, the blame for the world’s financial crises (and hence the poor performance of your portfolio) cannot all be laid at the feet of your adviser. Work out what is and is not under your adviser’s responsibility and control. Focus on what is.

• Fight Fair!

All relationships need both parties to develop conflict resolution skills. Don’t seethe and whinge behind people’s backs when things aren’t proceeding as you understood them. Contact the adviser and state your concerns giving them time to respond. Be polite and don’t make it personal. Use lots of “I” statements not the resentment inducing “You always…” or “You never…”

If that is not resolving the issue to your satisfaction move on to…

Escalation.

Make contact with that adviser’s superior and again, calmly and politely spell out the issues.

Failing that, vote with your feet and move on. Exhaust all the avenues before you reach that point but be prepared to walk away.

Don’t worry if you are feeling I have been one-sided in my expectations. I have a whole separate list of tips for advisers to take heed of for another day. Just for now let’s talk about what we can do to make a difference in the battle to improve the pervasive low respect for financial advisers that exists in our community.

R.I.P. Maggie

Before Indira, Angela, hopefully Hilary and, dare I say it; our Julia there was Maggie. A trailblazer and iconic figure of the 20^th century, she passed away yesterday from a stroke which followed declining physical and mental health over the last ten years.

The voice, the hair, the blue power suits, not to mention her policies and leadership, for us children of the 80’s, her long tenure over our teenage years meant she embodied many our first memories of Britain as we made our way into adulthood. For fans of the brilliant BBC TV series “The Young Ones”, who can forget Rick’s sustained attacks on Maggie’s conservative government?

Far more informed and learned scholarly writers than I will no doubt devote many column inches to the good and the bad of the Thatcher Years. My take on her commanding and sometimes brutal style of governance is an open admiration of what she would have had to endure and overcome to become the first (and only) female prime minister of Britain. If only half of what was depicted in Meryl Streeps’ pitch perfect portrayal of her in "The Iron Lady" is true, then she deserves all the accolades and eulogising (begrudging or not) that will come her way in the next few weeks.

I may have my rose-coloured glasses on but as I remember Margaret Thatcher and contrast her conviction and determination to transform Britain with her unpopular policies to the back flipping, spin doctoring style of our current leaders (male and female) I am overcome with ennui towards politics that is depressing. Damn it, I’m 45 and ready to care about what Australia will look like for my children and grandchildren. Like the single girl pining for the love of her life to show up, when is the leader of my dreams going to appear? Who is going to make me care?

If we give them the benefit of the doubt, we can assume most politicians start out with noble intentions to serve the community. To rise through the ranks of politics necessitates compromises and an ability to make favourable connections and affiliations that will act as a support base for any individual with leadership aspirations.

Yet, time and again, the reality of the “system” becomes apparent. We need to go no further than the unceremonious deposing of Kevin Rudd by the “faceless men” of the Labor party and Tony Abbott’s current inability to spell out with any conviction or authority his intended policies or “narrative”, as it is now termed, to highlight what defines modern politics in Australia.

If a leader (incumbent or aspiring) dares to state their thoughts or position on a contentious issue, the next morning “statement remorse” sets in and finds them running scared of what the next Nielsen poll will show. When inspiring leadership by definition requires a statement of vision, what hope can we have to feel loyalty to any politician when they are hobbled by constant inward looking speculation and analysis of their popularity.

This is why Malcolm Turnbull is compelling for many people. He has an opinion and sticks to it for more than a five second sound bite. Of course his neck isn’t on the line anymore so that makes it way easier to speak your mind but I can’t deny he has a statesmanlike air that is appealing.

And it’s why I give Julia points. However unsavoury the manner in which she became leader, Julia has shown fortitude and resolve in the face of scathing personal and professional attacks to continue to lead Australia and implement policies that the population may or may not agree with.

Sound familiar?

I suspect history will be a lot kinder to Julia Gillard like it has been for Hawke, Keating, Howard et al. Hindsight tends to do that.

So, draw near and listen close, Tony. If or when on September 14 you are unshackled from the policy clarification limbo we currently exist in, cut the BS. Tell me what you believe in for Australia. And why. And don’t backtrack if there’s a dip in the polls. I may not always agree with you but I’ll respect you for having the courage of your convictions without always having an eye on how you can stay in power.

We can all take a leaf out of Maggie’s book on that.

Leaning In and Out

A few weeks ago in her article in “Superwoman? Where?” Tracey Spicer highlighted the frustrating challenge of women and superannuation. Read it here if you haven't yet. She hit the nail on the head in so many ways and I commend her for it and her role as Super Champion for International Women’s Day. We need high profile women like Tracey to speak up on this topic.

Allow me to delve a little deeper into these issues.

For women who remain single, childless and independent for the duration of their lives it is stating the bleeding obvious to them about the need to provide for their retirement.

More complicated is when we are in relationships. Which, let’s face it, is a good proportion of us at some point in our lifetimes. People tend to see financial advisers as a couple when they are a couple. Not always, but we are talking generalities here so bear with me.

When a couple is working out what their income sources in retirement are, they look at the picture as a whole. If she has $28,000 in super and he has $500,000 then the income is worked out on the total asset position of $528,000. At that point, assuming the couple is in a committed relationship, nobody’s worrying too much about the inequity.

The kicker comes when relationships fall apart. Suddenly, for reasons of guilt, greed or expediency the contribution of the non-or part time working spouse can lose its value in the eyes of the career partner.

Of course, this is meant to be dealt with in divorce settlements but all the statistics show that men recover financially a helluva lot quicker that women if there is disparity in earning power. I am not saying that men don’t suffer financial consequences – very few people emerge from the financial settlement process saying “Gee that was just fantastic and I am so happy with the outcome of my divorce” – but on separation the reality check that you don’t take your partner’s income and future earning capacity with you hits home.

In the aftermath of divorce no decision you have made is left unquestioned. I have spent many hours asking myself how and why I found myself to be in the position where, when equally educated and qualified as my ex-husband, his earnings are exceptional and mine are, well, not so much. What I came to is this. I did not value my human capital.

I once heard that the biggest and best asset you have is your human capital – the talent, experience and qualifications you build up over a lifetime that add up to your ability to earn an income. Yes, there is huge structural, gender and historical issues that come into play to make the issue a complex one for women but we need to be asking ourselves some hard questions, too.

When I hear Sheryl Sandberg, the COO of Facebook and author of a recent book called “Lean In: Women, Work and the Will to Lead”, talking about women “leaning in” to their careers and not “leaving before you leave” I know exactly what she is on about. I was “leaning out” in the early days of my career with a deep desire for children and to be a homemaker. My behaviour, actions and decisions around my career have had a consequence. Although I made them for what I thought was “for the good of the family” I paid a price – in financial terms as well as self-esteem and confidence.

Of course, not everything comes down to the mighty dollar. Life is more than just some black and white number representing earning capacity or a superannuation balance. I loved being home raising my children in their early years and I still love it now when they are older.  But I am much more conscious of the consequences of my decisions than I was when I was 27 and pregnant with my first child.

In my opinion, having this discussion with future generations is key. Younger women can learn from our wisdom and different experiences. I want my daughters and nieces to understand, protect and treasure the value of their education, their job choices and opportunities and the huge potential that resides within each of them.

I’ll end with where Tracey got to – Let’s pop our undies over the top of our clothes and become real Super Women!

Money and Children: Walk The Line

One of my all time favourite movies is “Walk The Line” based on the life of Johnny Cash with Joaquin Phoenix as Cash and Reese Witherspoon taking the role of his second wife and great love and supporter, June Carter. One of many great scenes is June (Witherspoon), coming upon Johnny (Phoenix) and his mates in a drinking session just before they are about to perform, yelling (in her best southern drawl) “Y’all can’t walk the line”.

There’s so many “lines” we have to walk in this life but the one I’ve been thinking about lately is money and children. Mainly, how can I pass on just the right lessons around money that has my children develop a healthy sense of appreciation for the effort involved in earning money and looking after it (good money habits) but not overdo it so that they either become joyless penny pinchers or reject the whole thing and turn out to be flagrant spendthrifts? Where is the instruction manual for parenting when you need it?

This has come upon me more so now that my eldest son is seventeen and in his last year of school. Don’t get me wrong I’ve been on the case for a while with allowances (Issue Number 1 – do you make them do chores for their allowance or keep chores as part of general contribution to family life) but recently my ex and I bought him a car when he passed his driving test.

He is an exceptionally lucky young man to have had a car provided for him from day one of his driving career but I am not sure if endlessly repeating this to your child is that effective or fair either as we are the ones that made the decision to buy the car. Issue Number 2 – should you do this (if you are able to afford it) or is it better to make them wait until they have saved for at least some of it on their own?

I have lingering unease that this may not be the best way to convey lessons on purchasing significant assets but the convenience factor was hard to ignore. His independence means my freedom in a way. I suspect I would be carless a fair bit if he didn’t have his own, with constant requests to borrow my car on his agenda.

Then there are the running costs to consider. I have bumped up his allowance a little to cover petrol and maintenance but when you take into account insurance, registration and CTP plus tolls you start to realise that bankrolling cars for your child on top of yourself is tres expensive.

Issue Number 3 – should you make your children get a job in their last year of school when the finishing line of the HSC is in sight? At the moment I am shrilly telling him that as soon as exams and “schoolies” are out of the way that is the end of the penny section (my Dad’s favourite saying to indicate good things were coming to an end) and he will be on his own as far as running his car is concerned.

Again I carry a sense of unease about a missed opportunity for life lessons here that might explain why I keep reminding (nagging) him that the current situation won’t be going on for too much longer. It’s hardly effective parenting – I should either require him to contribute or keep quiet.

This is the frustrating thing about “walking the line” on this subject. The push and pull between wanting to give your children all that you can but also recognising this doesn’t always do them any favours as far as personal growth and development go.

My children have enjoyed comfortable homes and wonderful educations plus all the other trappings of modern life – travel and material possessions - but where and when should it end? How will they learn the lesson that striving and achieving financial goals through one’s own efforts is more satisfactory and confidence building than being handed it on a plate?

Perhaps the proof really is in the eating of the pudding. One day my seventeen year old will be forty-seven and I will get to see the outcome of my parenting - good and not so good. A sobering thought but a good take away for me. Some lines may have to be redrawn but that’s ok. Parenting is no exact science that’s for sure. Even June Carter would agree with that! 

Shares: Weird, Annoying but Smart

Have you noticed that your teenagers say “weird” and “annoying” all the time? A friend pointed this out a while ago and ever since then all I can hear at the end of their interpersonal communications with myself or anyone else is things like this. That’s so weeeiirrd! She’s so annoying. Mum, you’re just weird. And annoying.

And then, blow me down, if I didn’t start hearing myself start sprouting these highly useful catch-all phrases. Like yesterday for example. I actually said this. “How does Ian Macdonald sleep at night with those weak responses to all those damning coincidences? He’s so annoying.” Aaaarggghhhh.

It’s like how I started saying “random” when my eldest hit high school. Following that it was the derisory laden “brrrt” he used to impart every time his younger sisters said or did…well, anything.  “Brrt” is not so much a word as it is a sound. A sound that is an excellent way of making someone else feel completely crap for something they’ve just expressed. Thankfully that pearler been relegated to the teenager saying archives much the same way as daggy and groovy have disappeared.

Anyhoo, Australian shares (via the All Ordinaries Index) poked their head above the watershed mark of 5000 points yesterday. It’s the seventh time it’s done this since mid 2008. I know this because Alan Kohler showed us the graph on the ABC news last night. I love Alan. He delivers his finance news with such a cheeky grin and twinkle in his eye that you can’t help but listen to his insightful and fascinating commentary.

To a lot of people (and many women) shares are annoying…and weird. Not to mention scary. Their value bounces up and down all the time (and in the last few years there’s been a lot of down) sometimes for reasons beyond the company’s control plus the whole business of buying and selling shares is so complex and jargon driven it’s impossible to get a handle on it. These are valid points and I hear your pain.

But I think having some exposure to shares in your portfolio, both in and out of super is awesome (another favourite). Note that I said SOME exposure. Financial advisers and planners think in terms of asset allocation. This is a fancy word for spreading your money across the four main asset classes; cash, fixed interest, property and shares. So we’re not talking here about ploughing every cent into the speccy share tip from your brother’s wife’s sister’s husband.

It’s about working out (preferably with an adviser) how you want to distribute your capital across the different investments available and what you are comfortable with depending on your risk appetite.

Shares have a great many things on their side, too, that makes them a sick (confusing that one but still popular in my household but apparently meant to hold good connotations) asset class.

They are highly liquid, meaning if you need the money you can easily convert them into cash without significantly affecting the price you receive for them. The costs of buying and selling are low with zero “maintenance” costs of holding them and assuming you are buying a well diversified block of blue chips shares you are also going to be receiving some welcome tax effective income in the form of franked dividends.

There is a myriad source of education and information on share investing for you to ramp up your knowledge (the ASX website is a great place to start) plus there are some very simple ways to invest in a managed diversified portfolio through a single investment like units in a managed fund or Listed Investment Companies or Exchange Traded Fund (ETF). Talk with your adviser about these. Go on, YOLO! (Google that one if confused)

I’m not here to advocate one asset class over another. In fact, my whole point is one of diversification. Yes, that old chestnut. Inflation eats away at the buying power of our money over time so we have to give ourselves a fighting chance for our money to grow ahead of inflation by taking a degree of calculated risk and direct some money into growth assets like property AND potentially, shares. Diversifying smoothes the performance of our portfolio and this reduces the ups and downs of the rollercoaster ride that, at times, is investing.

So, whatever (that one, right there, uttered by my teenage daughter, combined with a hair flick sets my teeth on edge like no other teenspeak can). I hope that’s given you food for thought this week.

And just maybe, like most teenagers, who come to realise in time, things that seem “weird and annoying” at first, are in fact “heaps good” (perhaps the worst offence against the English language by sub 20 year olds), you will discover that investing in shares is, too.

 Whaddya reckon?