David French | 18/02/2009 2:02:03 PM

This article was originally published in The Morning Bulletin on 25th January 2002

General confusion exists as to who does what in personal finance. That’s not surprising, sometimes it seems the industry puts more effort into maintaining obscurity than it does into providing decent product and services.

Financial planners are a very difficult group to define. The idea behind financial planning is that a person’s overall situation is taken into account before investment recommendations are made. Some operators just sell managed funds, and some only sell in-house managed funds. Others are insurance sales people who have decided to sell investment products as well. The best financial planners have a detailed knowledge of financial markets and products, have time to get to know what you really want and recognize when specialist advice is required. Financial planners need to either hold a licence to deal in securities issued by the Australian Securities and Investments Commission, or they operate under a Proper Authority issued by a licenced dealer.

Stockbrokers are of most use if you need to buy and sell shares, but are often of limited use if you need advice that looks at your overall financial situation. Most stockbrokers are paid through commissions so their main job is to generate buying and selling activity. The best ones actively seek out buyers and sellers and are knowledgeable about the investments they are dealing in. Research analysts and corporate finance specialists often support stockbrokers. Analysts investigate investment opportunities and provide reports to stockbrokers and clients, while corporate finance executives generate new product (floats, etc) for stockbrokers to sell. Stockbrokers also need to be licenced.

Accountants’ skills vary widely but for most of them, the focus is tax. Some specialise in simple tax returns, others have a good grasp of the development of tax efficient structures for small companies. Some accountants offer financial planning (for which the licencing rules above apply) or business planning services. It is worth recognizing that accounting methodology relies on historical facts, and therefore accounting methods alone are often of limited use in determining a forward-looking investment plan.

Lawyers are extremely useful when drafting a will or for addressing other estate planning matters. A couple of hundred dollars for a decent will is cheap when it could save thousands for your beneficiaries (unless you hate them of course!).

Insurance salespeople are much maligned, but consumers need excellent advice when buying insurance, particularly life insurance. There are so many different types, and each policy has special quirks. Some insurance people specialise in estate planning, a sophisticated and very important area, particularly for those in small business.

Each of the above players has an important part to play in getting the most from your finances. A good financial planner should be able to bring all these resources together for your benefit. Good specialists will recognize that this is not a threat, but simply a way to serve clients better.

Finding a financial planner is discussed in detail in the ASIC good advice guide, available at http://www.fido.gov.au. The Financial Planning Association, the peak professional body for financial planners, has additional information available at http://www.goodadvice.com.au/.

The Investment Collective (AFSL 471728) is a non-aligned financial planning and investment firm specialising in providing tailored financial and investment advice for individuals and small business. Capricorn Investment Partners Limited's services include financial planning, share trading, portfolio management, insurance broking and self managed super fund administration. Additional information on services provided by The Investment Collective Limited can be found by following this link. Readers are reminded that this document has been prepared for general information purposes only, and any advice contained herein has been prepared without taking into account your financial objectives, situation or needs. Readers are advised to see their financial advisor prior to acting on any general advice.

More articles about fees, insurance, accounting, investing, financial planning.