0491 026 713

Getting the right financial advice is important for people of all ages. Whether you’re starting out or well into your wealth creation journey, good financial advice helps you to define your goals and develop a path to their achievement. It gives you a map and ongoing support to help you take control of your future.

Financial advice encompasses many areas including cashflow management, debt structuring, investing, superannuation, insurance, estate planning and investments. It should be personalised to your individual situation based on your needs and goals.

When you get personalised advice, your advisor should take into account your individual investment profile. This more than simply the completion of a “risk profile questionnaire” but should be a detailed discussion explaining the concepts or risk and return / volatility / asset allocation etc. to ensure that he or she understands your level of risk tolerance

To understand your investment profile you will typically be asked a series of questions that relate to the following areas:

Investment profile

When you get personalised investment advice it should always take into account your investment profile. This helps shape what type of investment strategy you should be considering.

To understand your investment profile you will typically be asked a series of questions that relate to the following areas:

Risk capacity and investment experience

Your risk profile helps determine your experience and approach to investing. It takes into account how you feel about market movements and how you think you would react if the market were to fall. How you think you would react and how people actually react are often very different which is where investment experience comes into effect.

A good adviser will help with behavioural coaching along the way to ensure clients don’t harm themselves by selling when the markets dips, which they inevitably do. We’ve found that keeping clients continually updated is the best way help them stay on the right track and avoid the temptation to sell when others are negative (and it’s usually a great time to buy), like around Brexit and the US Election in 2016.

If market falls make you nervous or if a significant market fall would cause you to sell all your investments, your may be suited to a more conservative investment strategy.

If you’re the type of person with the capacity and inclination to add to your investments when the market falls, you may be suited to a higher growth portfolio.

Investment horizon

Your investment profile also seeks to understand your investment horizon. This is how long you intend to invest for and whether you plan to make withdrawals along the way.

If it’s for the long-term (7 or more years) you may be better suited to a portfolio that has a higher percentage of growth assets like shares or property. Shares and property have higher growth potential but are riskier than other assets like bonds or cash so your investment time-frame needs to be longer to give you the best chance of reaching your goals. A long investment horizon means you can weather ups and downs in your portfolio to ultimately achieve a better result.

Investors with a shorter term investment horizon (4 or less years) could be better suited to a more “balanced” portfolio consisting of defensive assets like bonds and cash with less exposure to shares and property.

Stage of life and cashflow needs

Connected to investment horizon, your life stage may impact your need for regular cashflow. Younger people have a longer investment timeline and less short term costs so can afford to take on more risk. Older people nearing retirement are generally suited to a more conservative strategy as they will be looking to use the income from their investments to fund their cashflow needs.

There is an interplay between these areas and getting good advice considers all these aspects to determine the best strategy for you.

Ensure you have enough for a rainy day

If you start investing it’s vital that you have a rainy day fund (aka an emergency fund or savings buffer). It’s an amount of money you have saved that can cover the costs of a surprise expense or a period without an income.

Having some cash set aside means you don’t need to borrow or dip into your longer term investments if you need money quickly. It gives you some breathing space if things go wrong.

Investing isn’t right for everyone, it’s more important to pay off high interest debt before investing your savings. This is because the interest rate on loans like credit cards is higher than the returns you can expect to make from investing.

Avoid behavioural mistakes

Good investment advice helps you to avoid decisions motivated by emotions which can harm your ability to make good returns. In practice most people (including experts) make costly behavioural mistakes when given full control of their investment decision making.

A US investment research firm that analysed individual investor behaviour for over 20 years and found the average investor loses approximately 4% per year from behavioural mistakes. Some of these mistakes include

  • Trying to time the market
  • Buying into expensive funds
  • Chasing returns in “hot” sectors or markets
  • Panicking when the market dips
  • Being overconfident about their own knowledge
  • Anchoring
  • Herd mentality

Financial advice from a qualified advisor, like Jonathan Wilkes of Cornerstone Financial Solutions, is designed to help you avoid these behavioural mistakes and help you stick to a long-term plan. The advice you get from us is kept up-to-date with your situation and goals and we adjust your financial strategy accordingly.

Doing this as an individual is extremely hard as there are a number of issues to consider when managing ones wealth creation strategy. You have emotions to battle with and take counter intuitive actions like selling an investment that is performing well to reduce risk and investing when markets are not doing so well. We assist you to make these and many other decisions to help you achieve the outcomes you are looking for.

Ongoing advice keeps you on track

Financial advice isn’t just a once off process, it needs to be monitored and updated regularly to give you the best chance of reaching your goals.

Jonathan Wilkes

Cornerstone Financial Solutions

Cornerstone Financial Solutions

0491 026 713

9 Waterloo Rd, North Epping
NSW 2121, Australia

PO Box 204 Epping
NSW 1710, Australia

ASIC AFS No. 318136
ABN: 37 613 845 051
ACN: 613845051

Corporate Authorised Representative of
Madison Financial Group Pty Ltd

ABN: 36 002 459 001
AFSL: 246679

Cornerstone Financial Solutions Pty Ltd ACN 613 845 051 is a Corporate Credit Representative (495348) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237)