My visit to an MLC Financial Planner

You would think that with being frugal and having an ambitious goal of not only paying off my home mortgage by the end of 2016 but also wanting to become a billionaire that I would be working with a financial planner.  Actually, until recently, I have had an irrational distrust of financial planners.

I blame the news.  There have been so many stories of shonky financial plannners, who with little education, go on to lure people into investments that are unsuited to their risk profiles or needs and that (perhaps unsurprisingly) tend to reward the planners with high commissions.

And then there was the financial planner (no longer in the industry) who advised my Nana to put all her savings into a safe investment vehicle that was subsequently frozen in the Global Financial Crisis.

Or perhaps it is just my ego, which believes that I am super intelligent and well informed and that I am making all the best decisions.  About everything.  Including investments.

Following separation and imminent divorce, I am a mother providing for two young children.  So I need to think about providing for the kiddies and their future education, school trips, orthodontics, unexpected health problems, school books, uniforms, and anything else they might need like, say, food.  And they will need all those things whether I am in sickness or good health – I have a stable public service job but there are still a lot of uncertainties in life.  Plus my whole financial plan is topsy turvey as I separate out and sell off investments still held jointly with my ex.

So when Michael Miller from MLC approached me about working together, I was keen. Not just because creating affluence is part of my journey, and the ‘why’ of the Ms Frugal Ears blog, but because it was time for a financial check-up.

We last week for an overview of my financial situation.  Ahead of the meeting, Michael sent me a list of documents to bring with me.  This included:

• Payslips / PAYG / Annual Tax Statements
• Super fund statements
• Current insurance policies (Car, Home, Life, TPD, Trauma, Income Protection)
• Any investment documentation
• Proof of ID e.g. driver’s license or passport.

Because I am super organized (ish), I have most of these details handy in a folder that I could bring with me.  And I also had an excel spreadsheet with monthly income/expenses. But even so, it made me stop and ponder my financial situation, and especially whether I had enough insurance.

When I arrived at the meeting Michael took time to ask me about my financial goals.  He has an MLC standard questionnaire that he uses to prompt questions about client’s financial situation, and their goals and family situation.  As I spoke he was taking notes, drawing little stick-figure diagrams of my family members, wanting to know the names of my kids, how old they were and what my goals were for myself and for them.

What I liked about meeting with Michael is that it forced me to think critically about my financial goals. It is fine to want to be really rich, but what does that actually mean?  Do I actually need that much money to live comfortably?  Financial goals are different for everyone, and what is wealth and enough to live on also differs for everyone. Michael did not laugh or try to interject when I told him that my goals were:

• To pay off my mortgage and own my home outright as soon as possible, aiming for at the end of this year;
• To then save for a better quality car (currently driving a 2011 family-friendly model which is still safe but won’t be for much longer);
• Save to take splurge on a holiday overseas, specifically to visit Positano in Italy to stay at a boutique small hotel called La Sirenuse (which is Italian for my name!);
• To create an investment income stream that would be equal to or greater than my salary, allowing me to leave my job if I decided to.

Michael did not try to convince me to forego paying off my mortgage in favour of other investments. If anything, we discussed at length the value of paying off a mortgage as opposed to other seemingly more attractive yet less sound investment products that are often promoted.

“One of the problems with advertising of financial products is that the detail is hidden in the long disclosure statement,” he said.  “People get lured into the happy lifestyle pictures in the ad but don’t pause to consider elements like fees and charges or what risk might be involved.”

Michael went on to explain that there are four essential elements in a good financial plan:

1. Cashflow (income minus expenses);
2. Risk management;
3. Debt management; and
4. A financial independence plan / retirement.

I liked the way that Michael didn’t just talk about ‘retirement’.  One of my traditional criticisms of the financial planning industry is that it focuses on cashed up retirees who want to invest their lump sum super payout. Michael is different in that he is interested in working with people at all stages of life, including young people early in their careers.  ‘Retirement’ can sound a long way off but who doesn’t want financial independence?  Sounds pretty good to me.

I also liked how Michael impressed as genuinely having listened to me and understood my risk profile and needs. He didn’t try to force insurance on me that I don’t need with my stable public service job, nor to peddle investment products I didn’t need.

After chatting about my goals and how I planned to reach them, we had a chat more generally about what a financial planner does. Or at least what Michael does at MLC.  Because not all financial planners work the same.  Michael said his role is aimed at providing:

• An investment review – there might be a better approach out there that you might not have thought about (I for one love reading about investment/financial issues but don’t have much time to do so);
• An understanding of legislation and regulations, including on things like superannuation rules (for those working in the Commonwealth Public Service, he really gets the CSS and PSS super systems and how they work and talked me through some things about my scheme I didn’t know about);
• How to cope financially with change – with changes to my marital status and the arrival of two kidlets I have seen a bit of that recently. It happens.  And it changed my financial plan fairly dramatically.
• Spotting the One Big Mistake – a financial planner like Michael has seen lots of sexy sure-thing investments that are too good to be true. And lots of risky strategies. He is good at spotting the things that could become a problem.

I left feeling reassured that I was roughly on the right track.  We are going to work together further; he is going to put together a report that will chart if my current plan is on course to meet my goal to have $2 million networth by 2020.  This is a little scary, but definitely worth doing. I can’t wait to see how on or off course I am.

Ms Frugal Ears participated in a financial planning consultation with Michael Miller from MLC at his invitation. Ms Frugal Ears will be working with Michael further on posts about investment, saving and financial planning.  Stay tuned for more.