As independent financial planners, it’s common for us to hear all sorts of reasons why people don’t want or need financial advice. Here’s our list of the top ten answers people give for not seeking the help of a financial adviser – and our reasons why we think you should.
1. It will cost too much
People are often reluctant to pay for financial advice, thinking the cost will be too high or the advice not worth it. It can sometimes be hard to judge the value of paying for financial advice, as it is intangible and some of the benefits will only become clearer over the longer term.
However, a good independent financial adviser will be able to explain their fee structure to you and will be transparent on what and how you will pay. At First Wealth we separate the cost into two parts – one cost for the initial financial planning process and another one for the ongoing advice and service (including wealth management) – so that clients can see exactly how the fees break down.
A good adviser will bring order and organisation to all your financial affairs and also stop you from making financial mistakes that could end up having a significant negative impact over the longer term (poor short-term investment decisions reacting to negative news is a classic example). Just as compound interest can work in your favour, the compounding effect of a mistake can cost you dearly.
For around the same amount as the average family holiday, you could create and implement a plan that considers your entire financial life along with your aspirations and ambitions for the years ahead.
High quality financial planning does come with a cost, but it’s all relative. The average family holiday costs around £2,500. For around the same amount (First Wealth currently charge £2,000 to produce Your Financial Plan) you could create and implement a plan that considers your entire financial life along with your aspirations and ambitions for the years ahead. It will give you the peace of mind that your finances and life goals are aligned and will aim to ensure your security whatever the eventuality. Not bad for the same price as a week in the sun.
2. I don’t trust the financial services industry
We completely understand this. The financial services sector has always had a problem with trust and, even though it’s ten years ago now, the financial crisis didn’t help. However, I’m happy to say that over recent years the financial planning profession has evolved significantly. The focus is now on financial life planning, not just selling a product like a pension or an ISA, meaning it’s much more client-centric. We work with you, not just for you, and we certainly don’t try to sell you things that you don’t want or need.
The profession is also strictly regulated. Look for a Chartered Financial Planning firm (such as First Wealth!) to ensure you’re getting the very best advice – you can find them on the Chartered Insurance Institute’s website – or a Certified Financial Planner (we have two at First Wealth), which you can find on the database of the Chartered Institute for Securities & Investment.
3. Financial advisers are too pushy
Sadly, for too many financial advisers the only source of their revenue is to be paid depending on the product sales they make, which can lead to clients feeling pressured by their adviser to buy a certain product. Choose an adviser who has a separate planning fee (see above), rather than a product sale driven model, and make sure you are paying for a plan rather than a product.
By breaking the link between the fee and the product, a good adviser can show you whether there is a need for a product at all and clarify where the product or investment sits in the broader plan. Everything should be seen as part of the bigger picture plan, so you have a clear reasoning behind every recommendation and suggestion being made. You should also have time to familiarise yourself with the plan (we actively encourage you to take as much time as you need) until you’re comfortable with the proposal.
Likewise, there might be occasions when, as advisers, we won’t have an answer to a question at our fingertips, and we’ll need to go away and think about it, to make sure we respond appropriately and consider all the complexities of your situation. Ultimately, working with an independent financial adviser means you get impartial, unbiased advice, always with your best interests at heart.
Ultimately, working with an independent financial adviser means you get impartial, unbiased advice, always with your best interests at heart.
4. I met with a financial adviser once – and never heard from them again
Often we’ll speak to new clients who have had a bad experience with another adviser. A common complaint is that they met with them once, bought a product from them and then barely heard from them ever again. At First Wealth, we took the decision several years ago not to offer one-off transaction-based advice, for example, just providing someone with a pension without looking at their broader circumstances. Without a full view of someone’s financial circumstances, it’s not possible to be confident we have given them the right advice for whatever situations life throws at them, which is a risk for the client and the adviser. An overall financial plan makes sure that all aspects are covered, benefiting the client and protecting both parties.
Building a strong and ongoing relationship with our clients is one of the most important parts of the work we do.
For us, building a strong and ongoing relationship with our clients is one of the most important parts of the work we do. It allows us to be proactive in helping you anticipate the transitions in your life, like setting up your own business or preparing for retirement, in plenty of time to ensure your financial plan is on course to meet your needs. We will continue to meet regularly to ensure that you are on track to achieve your desired financial lifestyle – not just once, but all through your life.
We work hard to make our meetings as interesting, interactive and fun as possible. Our aim is that you look forward to our get-togethers!
5. I don’t want to be judged on my financial mistakes
Some people may be all too aware that they need to take advice, but knowing how much they don’t know can itself put them off. It can sometimes be difficult to admit a lack of knowledge on a topic and it’s only human to want to avoid situations like this. Some clients also might worry about being judged over past financial decisions.
But, as advisers, we’re all only human too. Everyone has made mistakes – we certainly have. Maybe we’ve sold shares at the wrong time, bought an expensive car that lost money faster than it did 0 to 60mph, or splashed out for that gym membership in January, full of good intentions, but hardly ever went. We’re certainly not here to judge, so there’s nothing to be fearful of. We just want to give sound, impartial advice because we want to help people. There is little point worrying about the past. As trained, experienced financial advisers, we add value by helping you guard against and avoid making mistakes both now and in your financial future.
6. I don’t need financial advice – I can manage my investments myself
At the other end of the spectrum, there are those who feel that they don’t need any help in organising their finances and have all the knowledge they need to do it themselves. This may be true. They may have the insight and the time to manage their financial plans, or it might be a simple, low-risk decision that they need to make. But this is not the majority of most peoples’ experience.
All the evidence suggests you’ll be far more profitable if you take advice.
It can be tempting to plough ahead on your own, making your own investment decisions without an adviser, but all the evidence suggests you’ll be far more profitable if you take advice. For example, this article shows the difference in returns that individual investors in the Standard & Poor 500 see in comparison with a fund over a 30-year period. The return of the fund is 11.11%, versus the average investor return of 3.69%, a difference of 7.42% annually. A $100k investment earning 11.11% returns $2,358,275 over 30 years, versus $296,556 returned over the same time period at 3.69%. A difference of $2,061,719! The difference in returns is based on the investor’s behaviour. Investors reacting to new stories or short-term data will inevitably make bad decisions that destroy longer-term returns. We’re here to make sure investors avoid errors of judgment like this.
Financial decisions are not only complex in themselves, they also don’t exist in a vacuum. They are interlinked with other financial and life decisions, so the full picture needs to be assessed properly and professionally.
A lifestyle financial adviser can bring a three-disciplined approach to your circumstances, comprising: lifestyle financial planning; behavioural insight and coaching (to make sure you stick to your plans and don’t react to external factors in a way that will sabotage them); and wealth management. It’s quite possible for someone to have a good knowledge of, for example, investment management and be able to put a portfolio together. However, even the most savvy investor would usually benefit from some behavioural coaching and support at times of market volatility, or when the media is screaming about the latest crisis. We make sure a knee-jerk reaction to Brexit or a headlong gold rush after the next Bitcoin don’t derail your investment strategy. We remind you that volatility can be good for a long-term investor and remaining disciplined in downturns is what brings real rewards.
The behaviour of investors has far more impact on their returns than the make-up of their portfolio.
Some investors might think they are immune to this, but time and again we see people making these mistakes even when they thought they knew better. It’s worth remembering that the behaviour of investors has far more impact on their returns than the make-up of their portfolio. A good adviser can marry all three of these crucial parts of financial planning together and give you the comprehensive and objective advice you need.
7. I can get advice from my friends and family
‘Borrowing’ financial advice from a member of your family or a friend can perhaps be tempting, but it is unlikely to turn out well. Neither generalised advice or someone else’s specific guidance are likely to be useful to you, and both could end up being very expensive for you. Financial advice is not a one-size-fits-all product that people can share between each other.
Everything has to be seen and assessed, and decisions made in the context of your own financial circumstances. Good advice addresses your own personal situation, and everyone is different. We all have different plans for life, different families, different tolerance levels to risk, different requirements from our insurance cover. It’s important to establish a plan and follow the advice tailored to your own life.
Even if your financial positions seem similar, be wary. We all have very different emotions when it comes to money, so what’s acceptable for one person, may be completely inappropriate for someone else! Your financial plan and advice should take this fact into account.
8. I don’t want to share my sensitive information with a ‘stranger’
The flip side of taking advice from those you know, is not wanting a stranger to deal with your sensitive financial information. We understand that this can sometimes be an exposing experience but, as noted above, we don’t judge. The reason we need to have access to this information is that we couldn’t be sure we’re giving the correct advice without fully understanding all the details of your situation (and anyone who does offer to do this you should be wary of).
We take pride in spending time getting to know our clients and understanding their hopes, fears and what matters most to them.
We take pride in spending time getting to know our clients and understanding their hopes, fears and what matters most to them. We also make sure they understand why we ask for information about things like their monthly expenditure. The reason for this is to help with their cash-flow modelling and to create a plan which guarantees they are going to have enough money to maintain their standard of living up future. Any information they share with us in the course of our relationship is also treated in the utmost confidence and consistent with all relevant regulation surrounding the handling of personal and financial data.
9. Financial advice just isn’t for me
Many people who would benefit from financial advice are often unaware they need it. Others may not be aware of the complexity of their financial situation or be under the impression that advice is not aimed at them. Even if they have some awareness that they could benefit from some help, they might not know how to go about getting it.
Financial advice benefits everyone, whatever their age, circumstances or income.
Financial advice benefits everyone, whatever their age, circumstances or income. It’s our job as advisers to understand what you want to achieve, what matters most to you in your life, and put you on track to get there. As well as the positive, it’s also about providing the safety net for when things don’t go according to plan and life throws you a curveball.
Finally, even the best made plans are useless unless you stick to them. So, we keep you engaged and accountable to the agreed course of action, the one that’s going to deliver you to your desired lifestyle. For example, it’s easy to put off funding your Individuals Savings Account (ISA) for the year, in exchange for another fun holiday. This is great fun in the short term of course but can have a dramatic impact on your longer-term plans. This is a great example of Present Bias, which we cover in our Behavioural Finance guide. We make sure you follow through on your financial commitment by regularly reviewing your progress towards your goals.
10. I don’t need financial advice yet – I’ll get some in a few years
People sometimes try to convince themselves that they’ve got plenty of time to make financial plans for the future, and that it doesn’t need to be done just yet. It might not be top of your list of fun tasks, but why not think about it another way. Can you get excited about sorting out a pension? Maybe not. Can you get excited about planning to retire early and travel the world? More likely.
Can you get excited about sorting out a pension? Maybe not. Can you get excited about planning to retire early and travel the world? More likely.
The benefits of compounding over time mean there’s everything to gain from investing time and effort in your financial future today, and the reverse is also true: even missing out on a few years of contributions can have a dramatic effect on your outcome. The planning process is there to reassure you, it’s not something to be feared. As advisers, we’re here to deliver you to your ideal lifestyle. The sooner you start, the sooner you’ll get there. Now is the time to take control of your financial life.
Do any of the situations above describe you? If so, get in touch with us today as we’d love to show you how good financial advice can help you achieve what matters most to you in your life.