We often surprisingly hear potential clients say that they can get independent financial advice from a friend or a self-taught financial commentator. But no matter how well-meaning their intentions are, unless they are an independent qualified financial adviser, you cannot be sure that you are getting the best possible advice. So we will say it now: not everyone is qualified to provide financial advice.
To put it another way, you would not ask a friend to perform open-heart surgery on you. So why is it, when it comes to your finances, you avoid professional advice and go with what your friends say? While you may have a good idea of what will and won’t work well, only a professional has the specialist knowledge to help you maximise your finances.
In defence of my profession, I would like to present some of the misconceptions people have about the role of a financial adviser.
1. Financial advisers don’t know what my investment return will be.
It is a fact! We have no shame with the fact that we don’t know what your future return will be. Many investors that seek financial advice arrive at our doorstep with a target return in mind for their investment. However, these return objectives are influenced by past experiences, historical fund performance or a random number that will fulfil personal expectations. After all, who doesn’t want higher returns? We can refer to this return expectation as a desired return – a return target based on a want more than a need. Our role as financial advisers is to estimate the return you require to accomplish your objectives, taking into account your unique goals, time horizon, current asset base and risk tolerance, among other factors.
2. I only need an insurance policy from a financial adviser.
Your financial life is bigger than an insurance policy. Our first job is to get to know you. Financial planning is a holistic process that integrates your life’s goals with financial solutions, in order to create a financial plan. Many clients want to know: How can I save for my children’s education? Do I have enough money saved for retirement? What will happen to my children when I’m gone? How can I protect my income if I get disabled or retrenched? The goal of every financial adviser is to be the “Chief Financial Officer” of their client’s entire financial life. This work extends to investment, estate, retirement and risk planning.
3. You only need a financial adviser if you have a lot of money.
You can benefit from working with a financial adviser because you have competing financial goals – not necessarily because you have a lot of money. You may be thinking about buying a house, starting a family, travelling the world or any number of other things. All of these goals are competing for a slice of your salary, so setting your priorities and adjusting your savings percentages with an adviser becomes a requirement. Financial planning is a continuous process of anticipating and adapting to changes in personal circumstances over the long-term.
4. Financial advisers charge me fees for advice that I can get for free.
It is probably safe to assume that people take financial advice from friends rather than a professional because of the costs associated with it. While your friend is unlikely to charge you, you could potentially be losing out on more than just the adviser’s fee. To use another medical comparison, you can Google the symptoms of your illness online but that doesn’t mean that medical consultation must be free when you finally go to the doctor. Advisers like any other professional need to be incentivised for the work that they do. A qualified financial adviser is an individual whose job it is to get the most out of your finances and the benefits are likely to far outweigh the costs.