Does it surprise you that 86.6% of Australian adults did not have a financial adviser, according to the “Investment Trends Direct Client Report”, based on a survey of 10,367 Australian adults concluded in late 2015?
When financial security and independence is increasingly imperative, why such a large number?
Many people do not know what a financial adviser actually does, so they are unaware of the scope and impact of this service. If they’ve never met such a person personally, the ‘fear of the unknown’ may be one of their greatest obstacles to getting help from a trusted adviser.
Others may be too afraid to reach out to a financial adviser for fear of not having enough, not knowing enough, or being told their dreams just aren’t achievable. They don’t want to be made to look like a fool for their mistakes in the past. They may also fear putting their trust in the wrong people for guidance, or fear being told they need to change and sacrifice or give up what they are enjoying now.
Another key reason for not seeking advice is timing. Some people prefer to seek advice only when they think they need it: they are more likely to pay for the cure for problems instead of investing in prevention. Major life-changing events – like starting a new business, buying a house, inheriting money, divorce or retiring – are times when people use or consider using an adviser.
However, the best way to arrive early at your financial destination is to start early so you can benefit from good money management habits and compound interest from early investments.
Does advice cost too much?
We can’t deny cost is one of the main concerns for people who don’t seek advice. But what’s the cost for not seeking advice? Think about what your net worth might be in 10 or 20 years if you do it alone without an adviser or don’t do anything at all – allowing for big financial mistakes and delays along the way. Then consider the impact on your wealth if someone helps you eliminate mistakes and time delays by taking actions, making an informed decision and keeping you on track and being accountable.
Price is only an issue in the absence of value.
When advisers provide advice, their client’s cash flow, debt management, investment portfolio and risk management strategy are important. But these are inputs, not outputs. In their client’s eyes, the important things are peace of mind, a sense of wellbeing and freedom to pursue the life they want.
What does great financial advice look like?
Clients trust their adviser not because they fully understand what they do, but because they know their adviser understands them. When clients come to see an adviser, their problems and financial goals are easy to tell, but they also have unspoken needs, such as fears or aspirations. What keeps them up at night? Great advisers place both clients’ expressed needs and suppressed needs into perspective and present their clients with a course of action that inspires them.
If you want to have the life you want, you need to have a clear picture of what that life looks like. What’s important about money to you? The answer to this question is your core value. Your vision is where you want to go and how you want to live your life. Great financial advice helps you live your life in alignment with your core value and vision.
Having a big picture is as important as tackling small details. Lifelong cash flow modelling is a good indicator to show you in projection if you can achieve your desired lifestyle with the money you have. If cash modelling shows that you are not able to achieve your goals, your adviser may recommend you to adjust your expectations or change strategies. It can provide you with higher certainties in this uncertain world and help you make an informed decision.
However, life doesn’t always go according to plan. A trusted adviser can not only help you prepare in advance for unexpected events such as critical illness, job loss, divorce and accidents, but adjust plans and strategies according to changes so that you can quickly adapt to new ways of living.
A great plan needs effective implementation as the best financial plan in the world will be useless if you don’t follow it and take the necessary actions. The barrier between you and the life that you are capable of living is a lack of consistent actions directed towards your goals. It involves a long process and part of the adviser’s role is to keep you on track and accountable.
The biggest obstacle in the way of our financial success is a delay. If you wait for the perfect timing to start your financial plan or having extra money to invest one day, that day may never come along. I do agree with the words of George S. Patton – ‘A good plan today is better than a perfect plan tomorrow’.