Reflecting on some recent conversations, I have come to the conclusion that ethical Financial Advisers need to do a better job of explaining what we do and how we can save you money and help protect you.
So what does a Financial Adviser do?
- We get to know you and understand your risk profile and financial objectives, whether that is getting out of debt, buying your first home or getting money for a renovation.
- We will provide guidance and recommendations on how to best use your financial resources without telling you how to spend your money (unlike the banks ☹). We offer you budgeting advice and insights into what the banks are looking for.
- It’s our job to understand the financial markets and lending and insurance product so we can best recommend ones to suit your needs. This includes the government First Home Grant application, if you are buying or building your first home.
- We will help you understand what to do when to get what you want. Timing is important.
- Financial Advisers help you get debt free and save for retirement – woohoo!
- We take the pain out of dealing with insurance companies and banks
Pretty much everything we do is all about you!
So how this plays out in reality. We collect the information with you and can help to collate some of that information and provide guidance on what the banks want to know before lending to you. Then we package it up in applications to the banks and advocate for you to get the best terms, interest rates and results.
With Lending it is all about getting the best loan structure to help you afford the lending over the long term, and to reduce the interest that you pay. We are now moving into an economic environment with increasing interest rates and higher inflation. Blah blah so what? Finance and insurance can be so confusing and if you can afford to live and pay your mortgage today, you may feel ok. So what? How does it affect me?
Well let’s talk about it. An increase in your loan interest rate of 1% in a $100k loan will mean an increase in your loan payments of approximately $74 per week for a 30 year loan. We have already seen the 1 yr rate increase since August from 2.49% to 3.65%. The 5 yr rate has gone from 2.99% to 4.85% and higher. The floating rates have gone from 3.8% to over 5%. Sad to say this is just the start.
So anyway, back to why talk to your Financial Adviser.
We want to know what your plans are, not so we can judge but so that we can help you to get your debts paid back quickly and easily and to help you afford your lifestyle without stress.
Rising interest rates means increased mortgage payments and the truth is an increase in interest rates just means paying more money without reducing your debt any faster or giving you the same joy you get when you go out for a meal or spend money on a new toy.
Speaking of new toys, that is another reason to talk to us. It is not about seeking permission from your Financial Advisor, it is about understanding the consequences of the decision. We can often give you a quick insight into the impact of that choice, and sometimes even save you money.
Changing jobs and switching from employee to self employed? Another time to talk to your Financial Adviser. A change in your income situation is meant to trigger a notification to your bank. But actually there are bigger things to consider. I am not saying don’t notify your bank. What I am saying is before you make that leap, do you have some reserves set up for any cashflow shortfalls as you get your new business or cash machine up and running? Have you sought advice from an accountant for the best tax structure, and should you be registered for GST? What insurance do you need to manage your risk, such as public liability cover?
You may have been planning to do a renovation, upgrade your car, or one of thousands of other opportunities but now find that you are unable to do so because of the ways the banks do their assessments. A quick chat with your adviser could have prevented the heartache of not getting what you want.
In short – we strongly encourage you to just flick us a quick email before making significant financial commitments, and we can give you a heads up of any potential issues and perhaps a tip or two on how to make the most of your money. While we are a Financial Advice service based in Lyttelton, we work with clients all over New Zealand so do get in touch and let us help you get what you want. Financial Advice can save you money. That’s what we’re here for!