Read a survey on financial advice and it’s estimated anywhere from 70% to 85% of people will never seek it. Yet from the small pool of people who have sought financial advice, 80-90% of those (depending on the survey) will acknowledge the advice they received was worthwhile and provided value.
One of the more curious areas of financial advice is when someone among that small group of Australians who’ve gone out of their way to seek financial advice, ends up ignoring it. They remain engaged with their adviser, they continue to pay fees for their service, but when it comes to a particular issue, they’ll ignore the advice or continual reminders to address a potential problem.
A good adviser doesn’t give advice unless it’s aimed at improving someone’s situation. Ignoring advice will generally come with a self-inflected penalty. Somewhere down the track, not taking action will be to the detriment of that person or their family.
A nagging issue may seem inconsequential at the time, but often we don’t find out we’ve made a financial mistake until much later in life. Or alternatively, after life has ended.
Despite repeated attempts we’ve had clients just completely ignore the idea of estate planning and specifically writing a Will. Sure, the reason for making a Will is something people may want to avoid the thought of, but it can have real ramifications when that time comes.
The person or their partner will then be relying on a favourable set of circumstances to avoid a series of headaches if one of them passes. Firstly, hoping that all assets are in joint names, so the surviving partner can continue to live day to day. Imagine a partner dying who does most of the day to day financials and has the transaction and savings accounts in their name.
When it comes to superannuation, it’s hoping that binding death nominations (BDN) haven’t lapsed. Some super platforms will have non-lapsing BDNs. Lucky. It might be only an educated guess, but you’d assume someone who avoids making a Will won’t address a lapsing BDN.
Let’s say there’s a new partner involved, yet a husband and wife haven’t divorced. Without a BDN that one’s left up to the super fund trustee to decide on who receives the death benefit. A nice and messy situation.
Moving over to financial markets. Opinions on market direction are irrelevant. They can be jarring to hear when someone on TV speaks about them with certainty, but they’re still irrelevant.
Advisers worth their salt don’t give guidance on market direction. Over the short term no one has any idea. Over the long term, historical financial data points to various assets classes exhibiting certain performance outcomes. Portfolios are built around those outcomes, according to an investor’s risk tolerance.
If an investor wants to remain in cash and fixed interest due to their beliefs about a date yet to be determined financial apocalypse, advisers will be frustrated, but will accommodate those wishes. Only the adviser would prefer the investor didn’t moan when it gets to year five, that financial apocalypse still hasn’t eventuated, and the investor’s returns have lagged a portfolio containing equities.
Advice is a focus on the process, implementing strategies that are known to work, while addressing gaps and risks.
If listened to and implemented advice can be quite valuable.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
