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Why do I need financial advice to get financially fit?

Updated: Dec 11, 2019

A Financial Adviser is similar to a personal trainer who will build a program of exercises, selecting the most appropriate for you. A personal trainer looks at:


1. What you are trying to achieve (weight loss, improved fitness, injury recovery)

2. What needs to be tailored for your personal circumstances (previous injuries, what equipment is available, your age and health circumstances)

3. Adding benefits by providing broader education on how and when to exercise, nutritional insights, how to manage injuries, best techniques and why.

4. Increasing the level of objective discipline in sticking to your goals compared to if you were on your own.

5. Keeping someone accountable to their plan, how to respond to any short-term set-backs and how to stay on track and maximise your chance of achieving your long-term goals.

6. Personal interaction that so many of us need to ensure that an expert is there and ensuring you are on track, not making any mistakes, celebrating short term wins and your long-term success!


A Financial Adviser can do the same for your financial fitness.


Wealth planning is one of the most important services an adviser can provide, and it requires an in-depth understanding of an individual’s entire personal and financial situation to help ensure you get it right. Professional guidance to uncover and comprehend what’s most important to you takes time and knowledge.


With a wealth of information at our fingertips, you may think you understand the markets enough to invest for yourself or that getting a financial professional to manage your assets is expensive. However, investing is challenging to say the least, and emotional responses in periods of volatility can undo years of past or future success.


Advisers can assist with interpreting the headlines. What is hype vs what do you really need to know and what, if anything, do you need to do? It’s this expert guidance that can create value when it is needed most. We would like to demonstrate that the services an adviser provides can be more than simply selecting investment products for you. Investment advisers can assist you in a full 360-degree spectrum of wealth planning, from investments, to retirement and estate planning, as well as guidance on taxation, in order to help you work toward your goals. In addition to specific services, advisers can provide education on investing principles and behavioural finance coaching.


Advisers can help you avoid common mistakes caused by human behaviour.


Investors are human. Humans make mistakes. People tend to let emotions and other human tendencies get in the way of their financial goals. Ultimately, investing like an emotional human may actually cost you money. You may ask - what is it about being human that can get in the way of achieving your goals?


· Your tendency to buy high and sell low (Emotional investing)

Typically, when the market is going up, we want to buy. When the market is going down, we want to sell. This happens because a positive perception of an investment or market can lead investors to feel they have a higher return and lower risk than they actually do, while a negative feeling can lead to predictions of lower returns and higher risk. Put another way, when scared, we run away and when we’re not scared, we may become too confident.


· Taking your investment cues based on others’ fears and goals (Social investing) Family, friends, co-workers, social media and the news can influence an investor to make decisions based on the emotions and situations of others, not their own goals.


· Allowing behaviour patterns make you lose sight of your goals (Ego investing) Many investors don’t heed their own advice. An investment professional can help you discover how much cash you need on hand to provide for your lifestyle and the lifestyle of your dependents against potential market downturns over the next few years. At the same time, an adviser may help you take advantage of investment opportunities with the rest of your wealth. Having professional advice may allow you to maximise the potential return of your wealth rather than investing it with fear. Knowing what an investor needs to do and doing it can be very different.


An adviser can provide a more tax-aware investment approach


Managing your tax affairs can be complicated and tedious at the best of times. However, an adviser can assist clients to make more tax aware decisions in managing someone’s financial position.


For example, superannuation is a tax advantaged environment for everyone. However, a financial adviser may provide guidance on choosing the appropriate tax-aware solutions and strategies that may improve your overall financial outcome. Tax-aware advisers may potentially add value for their clients by:


· Considering investment solutions that actively implement tax-aware strategies such as lower turnover styles, tax-minimisation overlays and centralised portfolio management

· Tax advice through superannuation contribution strategies (salary sacrifice and transition to retirement) and reinvesting tax savings

· Insurance premium – identifying tax deduction benefits in super

· Optimising tax for non-superannuation assets and managing ‘tax surprises’ as regulatory changes occur (e.g. recent superannuation legislative changes) Russell Investments


Your time is valuable.


Don’t underestimate how much time creating and maintaining a disciplined financial plan may take.


Many people identify as being time-poor, and as a result people are outsourcing more and more of their personal needs. It could be having a house cleaner, dog walker, home delivered groceries – whatever it might be to save time on the things we don’t enjoy and create more time to do what is important to us. So why not consider your Financial Adviser, as not only delivering you investment value – but also giving you back more time in your life.

This can be in two ways:


a) The financial administration burden – quantify YOUR time saved

A financial adviser may provide value in creating a financial plan in less time (and with more expertise) than most investors could do on their own. Beyond the creation of a plan, think about the time you may save by working with an experienced professional to help you monitor and make recommended adjustments to your investments, ongoing savings and contributions and ensure you have the right insurance in place. A financial plan is a key element in helping investors identify and reach their goals. But there is a lot of research and knowledge that goes on behind the scenes.


Consider the hours it would take you not only to take these steps, but also the knowledge you would need to have to do it successfully. And that is just coming up with and managing the plan. While we don’t like to consider what could go wrong, what happens in the event you need to claim on your insurance, or you go through a redundancy or a family issue that changes your financial circumstances? Advisers can take much of the burden in these times of crisis allowing you to focus on the things that are important to you. Making the decision to hire an adviser to help with your financial planning is important. When it comes time to decide whether to hire a professional, ask yourself - do I have the time, skill, inclination, or finances to do it all on my own?


The “Peace of Mind factor”


It is hard to put a number on this, but there is also the “Peace of Mind” factor that an adviser can provide you and your family. The first part is assisting in identifying what your goals are. The second part is knowing that you are doing everything you can to make the most out of your financial position and maximise the financial security for you and your family.


For you this might be less sleepless nights, finally getting the will or super consolidation done that you have meaning to or having the knowledge that you are taking the right actions. It might be the comfort in knowing what your total financial position is, and what financial steps you need to take to achieve your personal goals.


Trying to do this on your own can be challenging and daunting. This is different for everyone, but an adviser can help remove that doubt of “I don’t know what I don’t know” and give you confidence and security that you have the best preparation possible for and your family.


Conclusion


What is the price you’re paying and what is the value you’re getting from your adviser? A financial adviser can be important in helping you manage your money and can bring value to you in three key ways:


1. Steering you away from making behavioural mistakes like chasing performance

2. Providing a more tax-aware investment approach

3. Building complete financial plans that save you time and give you peace of mind, knowing a professional has thoroughly considered, implemented and is actively managing to your personal goals.


When you consider the value of an adviser helping you avoid common behavioural mistakes, the cost of producing and maintaining a financial plan, and the benefits of investing in a manner that increases your tax awareness.


Finding an adviser that can help you build and maintain a strategy for long-term investing has the potential to provide more than just financial returns and may pay off in more ways than you thought of.


“Price is what you pay. Value is what you get.” Warren Buffet



Stu Varidel and Your Choice Financial Planning Pty Ltd trading as Heart Financial Advisers are authorised representatives of Sentry Financial Services Pty Ltd.

The information contained herein is of a general nature only and does not constitute advice. You should not act on any information without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances. The views expressed here are not ours. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date.  To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties who are not related to us. These links are provided for convenience only and do not represent any endorsement or approval by us.

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