by Scott Newton22.04.21

When debt is overwhelming you, it might feel counterintuitive to fork out for anything other than bills and repayments. However, while at a fee, financial advisors can be your pathway to escaping a debt crunch with solutions that provide the best outcomes for your specific situation. Getting out of debt is a lot more than ‘earn more money, spend less’. It is rarely that simple, and can be made even more confusing and complicated if you’re working your way through it alone. So, what are you paying for when you enlist the help of a financial advisor and why use one?

Firstly, what is a financial advisor?

Essentially, financial advisors are qualified and experienced financial professionals who have a deep understanding of how to achieve financial goals and escape crippling debt. Their knowledge means they can advise you on solutions and pathways for your financial plan that you may not know existed, or did not know were applicable to you. They can also take the fear and stigma away from debt solution outcomes (especially for solutions like insolvency and bankruptcy - while they are often pitted as doomed outcomes, they can sometimes be the most positive step forward). 

How can a financial advisor help me get out of debt and are they worth it?

The best function a financial advisor provides is clear paths to your best case scenario out of debt. They can help you streamline your debts and repayments, offer pathways to get out of certain debts faster and create realistic and sustainable strategies for working through those debts. Financial advisors can also ensure that you are aware of the protocols required for some solutions (such as bankruptcy) and guide you through the aftermath. It’s not all doom and gloom, financial advisors can not only pull you through your debt, they can help to set you up for the future to avoid facing the same situation again.

Is it a good idea to enlist a financial advisor when I owe money?

In the long run, you will be financially better off to have a financial advisor guide you through your finances than to continue on your own, if you’re feeling overwhelmed without a strategy. The costs you could be saving that could be absorbed back to your creditors, the unnecessary interest accrued while you attempt to find solutions, or having incorrect assumptions (both that you are in worse condition and better condition) about your financial health can cost you far more than the fee of a financial advisor.

How can a financial advisor help a small business?

While financial advisors can be a great benefit to your individual finances, they are especially helpful to small business owners. Small businesses have a lot of incoming and outgoing funds, and the bills are not as streamlined as personal finances. The management of them is also a constant balance as you work on your actual business product or service offering, and time (or lack of) is often a big factor in not keeping up to date with financial obligations. Having a financial advisor guide your small business debts, planning and projections can mean you save money, have valuable business plans in place, invest sustainably and offer you significantly less risk of running into financial issues that can lead to insolvency or bankruptcy down the line. 

What questions should you ask a financial advisor?

There are many questions to ask your financial advisor, depending on the issue you have and want a solution for. A lot of what will occur when you’re seeking the help of a financial advisor is that you will be asked a lot of questions so that they can best navigate to the right solution for you to work toward. However, once that is done, you will (or should) be asked, ‘Do you have any questions for us?’. Very often, it can feel too on-the-spot and the opportunity is missed. However, it is very worth your while to arm yourself with a list of questions that will help you better gauge if this financial advisor is right for you, and if there pathways are the best for you. The answer to the following question is arguably the most important and will be the foundation of your entire experience with them: Are you a fiduciary? 

If this is a new term, it’s basically asking if their service’s MO is based on finding bespoke solutions in the best interest of clients (so, a yes to the question), or if they offer a one-size-fits-all solution that may or may not benefit you specifically. Of course, few will degrade their services to you… But, to follow up, ask them the specific ways they are fiduciary and if they have any examples to share. 

This is also an opportunity to find out: 

  • How much are your fees and what is involved with ongoing costs? (Do I pay for every phone call?)

  • What will our communication process consist of?

  • What will you need from me, specifically?

  • How often can I expect updates?

  • How will I be kept informed?

There will be plenty of other questions as you go, but these are the preliminary ones to ask to help you best decide a good fit.

Financial advisors’ immense knowledge on how to best organise, structure and manage your finances can make a big difference to your short, mid and long term financial goals and needs.

Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.