I’m often asked whether people actually need a financial adviser.
Strictly speaking, maybe not.
Let me explain...
Let me start off with two things.
- Financial advice is not just about investing. What most people need is a financial planner – someone to work out what they want from life, how much money they will need to do what they want to do, and when they’re going to need it.
- To answer the opening question: you may regret it if you don’t. As General Patton said: ‘a good plan today is better than a perfect plan tomorrow’. Day in and day out, I see the irreparable damage of people who have taken investment advice from a financial salesperson rather than a financial planner.
Now, financial advice is a choice.
Much like many professional services, it’s entirely possible to DIY.
The rules of building wealth and successful investing are remarkably simple.
But its extremely rare for us to review and not find a costly error.
Without doubt, having good advice, at the right time, may add immense value and convenience.
It will help to plan your life…
By prioritising the things that are most important to you.
Sifting through the endless ambiguity on investing and insurance to find solutions that align to your unique goals.
It’s also about guiding you onto the right path.
And pulling you back when you veer off track.
Being an unbiased soundboard for any doubts or fears and reminding you to stay the course for the long term.
Still not sure you should take financial advice?
Canadian neuropsychologist and executive coach, Dr Moira Somers, wrote a book called: Advice that Sticks: How to Give Financial Advice that People Will Follow.
She gives several reasons why people take advice:
1. Reduce complexity
There is a lot of complicated information out there. Experts help simplify this by understanding what is relevant to you and your individual needs.
2. Take action
Sometimes when faced with too many choices, people suffer from ‘decisional paralysis’. An expert will encourage you to make a decision.
3. Save time
Delegating a few of your financial responsibilities will free up more of your time and energy.
4. Offload unpleasantness
Getting someone to do the tasks that feel more like chores, will relieve you.
5. Make someone else happy
Seeking advice can indirectly benefit other people – especially for major life events like marriage and education.
6. Increase confidence
During doubtful and challenging times, a financial expert will reassure you of your goals and plans.
7. Help make better trade-offs
An adviser can help find the balance between what you want and what you can afford.
8. Receive encouragement
Changing your financial habits can be difficult. A financial expert can keep you motivated along the way.
9. Have someone to blame
Research suggests some people delegate primarily to waive responsibility and blame rather than to purely obtain good advice.
10. Feel safer
Studies show our brains process difficult financial decisions better when we receive advice from an expert.
(Interestingly, there’s no mention of “producing market-beating returns” or “picking the best investments”.)
I found an insightful report titled: ‘The Value of Financial Advice’…
It examines the impact of financial advice on the ‘affluent’ and ‘just getting by’. It found that:
- The ‘affluent but advised’ group accumulated 17% more in liquid financial assets and 16% more in pension wealth than their non-advised
- Similarly, the ‘just getting by but advised’ accumulated 39% more in liquid financial assets and 21% more in pension wealth than the ‘just getting by but non-advised’
- Financial advice led to greater levels of saving and investment in the equity market – across both ‘affluent but advised’ and ‘just getting by but advised’ groups
- 9 in 10 people were satisfied with the advice received at the time they received it
- 86% of people who were satisfied with their advice, bought a product recommended by the adviser
(On a side note, around 30% of those who received financial advice, thought it was free. Only 4.3% of that turned out to be true. The lack of transparency of fees and charges in financial services continues to concern me. It’s something we’re passionate about changing.)
Nick Maggiulli, compares investing to diet, exercise and meditation.
All of those things, he says, are simple but difficult.
While the rules of investing are easy, the waiting part is actually a challenge.
Investors are constantly surrounded by noise from their partners, family, friends and the media…
All offering an opinion on what should be done.
On the contrary, the best action is inaction.
It’s easier said than done – but a good financial adviser can help.
They’ll offer you support and guidance to save you from bad decisions.
And keep you invested for the long run.
Investing may seem simple after all. But it’s certainly not plain sailing when done alone.
Get in touch if you’re looking for someone to guide you along your investment journey.
