How Young Professionals Can Get Value from Financial Advice

June 25, 2020
Pedro Marin Ramirez

Financial Literacy Among Young Clients

When asking simple financial questions to young clients, the response I get is similar to what I would expect if I asked the binary code used to send Apollo 11 to the moon. Just imagine for a second a considered ‘mmmm…’ with eyes squinted as a response. A large majority of young Australians are not educating themselves on or seeking advice about arguably the most important features of their ‘financial homes’ – Insurance, Estate planning and investments (both inside and outside super).

Key Financial Questions

You might be wondering ‘Pedro, what are those questions you speak of?’ A good example of these are:

What happens to your super when you die?

Do you know what insurance/s you hold through super?

What is the name of the individual managing your money?

These are all superannuation-related questions to keep it simple, and some of you might say, “Well, I know all the answers to those questions.” However, thinking you know the answer doesn’t necessarily mean that it’s correct. This is when another considered squinted-eyed ‘mmm..’ moment happens.

Personal Experience: Navigating Superannuation as a Student

Starting out as bartender thirteen years ago as an international student and unfamiliar with the superannuation system in Australia, I remember being asked to “fill out this paperwork and we will put some money in this account and if you ever leave the country you can have some of that back,” and that was it! On that form there was the following question: ‘Who would you like to receive this money in the event of your death?’ For me that was obvious at the time, my mother! Simple, right? Well, not quite.

The above is one of the wrong answers I get when asked ‘What happens to your money if you die?’ Unknown to many, having your mother as beneficiary for your superannuation is a non-valid nomination. By law, in the event of your death, these funds can only be paid to ‘eligible’ people in your life.

Now, how is your mother not eligible? Well, currently the below list of categories are the only eligible nominations:

Your Spouse (this includes de facto and same sex partners), however not former partners;
Your children of any age;
Anyone financially dependent on you; and
Your estate or legal personal representative (Will).

This type of questioning to young professionals is why they can get such value from seeking financial advice. Quite often people make the mistake of “assuming” or “never thinking that far ahead” Which leads to a world of hurt in some situations.

Importance of Financial Planning for Young Professionals

I should emphasise, if Elon Musk was capable of sending those two astronauts into space, then we, as financial practitioners, should be capable of sending the great majority of our young professional earthlings towards the best financial outcome that we possibly can. A challenge not to astronomical.

Until next time,

Pedro Marin Ramirez CFP®