Much like visiting the dentist, many individuals tend to postpone seeking financial advice until they experience discomfort, whether from job loss, poor investment choices, or personal hardship. It is often during significant life events that people finally seek guidance. Despite the availability of sound, independent, and affordable financial advice, many individuals avoid seeking advice. But why?
I can do it on my own
Over the past three decades, the financial services industry has expanded significantly, creating a complex landscape that is challenging to navigate alone. This complexity has led to the development of numerous undergraduate and postgraduate qualifications designed for aspiring professionals. Most universities now offer specialised commerce degrees in financial planning, as well as postgraduate diplomas and certificates in wealth management and investing. Beyond navigating thousands of products and investment vehicles, a financial advisor plays a vital role in helping clients maintain composure during turbulent market conditions and serves as a guiding force amidst emotionally charged financial decisions. While going it alone is an option, partnering with a qualified financial advisor can simplify the process significantly.
I’m too busy
Many people report feeling overworked and time-poor, often using busyness as an excuse to avoid seeking financial advice. The adage ‘If you don’t have time to take care of your health today, you’d better make time for your illness tomorrow’ equally applies to financial health. Neglecting your financial well-being can have lasting consequences that you may come to regret later. Being too busy to address your finances is counterproductive and merely postpones essential decisions. If you need to get your financial affairs in order, it’s best to take action now rather than later.
I don’t have enough money
There is a prevalent misconception that professional financial advice is exclusive to high-net-worth individuals. Financial advisers are often viewed as guardians of wealth rather than as partners who guide us at the beginning of our financial journeys toward our goals. Unfortunately, many individuals wait until retirement to seek advice, only to find themselves underfunded and/or facing excessive tax burdens. By seeking financial planning advice early in your career, you can optimise tax efficiency, minimise investment fees, choose appropriate vehicles, and align your investments with your risk tolerance and financial goals.
It’s too early to start saving for retirement
The two critical factors for successful long-term investing are time and compounding interest. Regardless of your retirement aspirations or whether you plan to retire at all, initiating your investment journey early offers you one invaluable gift: choice. A longer investment horizon allows you the flexibility to retire early, shift careers, travel while you’re still young, or pursue philanthropic interests. Insufficient invested capital, however, limits your options and jeopardises your financial future.
I have group benefits
Most employers offer group benefits to fulfil their responsibilities toward employees. However, while these benefits contribute to your overall personal financial planning, they should not be relied upon as a substitute. The amount of group life or disability cover provided often does not align with individual needs as it is typically offered as multiples of an employee’s annual income. For example, you might receive life cover equal to three times your annual salary and disability income at 75% of your earnings, neither of which considers your unique circumstances, debt levels, or the financial needs of your spouse or children. Additionally, employees often contribute to a default retirement fund option, which may be a conservative investment strategy. This can lead to younger professionals being invested in the same way as their older colleagues. Assuming that your group benefits will comprehensively meet all your financial needs is a precarious assumption that could leave you unprepared for the future.
I can’t afford a financial planner
Financial planning practices employ various fee models, making it essential to identify one that aligns with your needs. Some advisors charge a flat monthly fee, while others base their fees on a percentage of assets under management (AUM), and some utilise a combination of both. Commission-based structures are increasingly falling out of favour due to the inherent conflict between generating sales and acting in the client’s best interest. Conversely, an advisor charging a percentage of AUM is motivated to keep your investments aligned with your goals. Many fee-based practices collaborate with discretionary fund managers (DFMs) for fund selection, allowing them to focus more on client service. This collaboration often results in economies of scale, which can lead to reduced investment fees and greater transparency regarding charges. Additionally, many fee-based planners utilise a sliding scale, where fees decrease as AUM increases. Regardless of the remuneration model you choose, it is crucial to negotiate all fees upfront and ensure full transparency throughout the process.
I am going to inherit
Relying on a future inheritance for your retirement planning is a dangerous strategy. Factors such as market fluctuations, family dynamics, poor investment choices, longevity, and tax implications can all impact a family’s wealth over time. Given the uncertainty surrounding the size, timing, and nature of any potential inheritance, it is prudent to establish your own retirement plan.
I don’t plan to retire
Even if you do not plan to retire, unforeseen circumstances could leave you with no choice. Retrenchment, disability, or health issues may thrust you into retirement without adequate emotional or financial preparation. With ongoing disruptions across various industries, it is unwise to assume you can work in your current field indefinitely. Therefore, regardless of your intentions, it is prudent to financially prepare for retirement in case you become unable to work in the future.
Seeking advice empowers clients to navigate complexities, plan effectively, and achieve financial peace of mind. Financial advisors play a vital role in breaking down these obstacles and guiding clients towards long-term financial well-being.
Have a fantastic day.
Sue