Happy new year dear reader.
Kiwis love to DIY.
This extends to financial planning too. Check out this report from Fidelity. Only around 22% of kiwis working with a Financial Adviser. Almost half of those seeking advice are just wanting to borrow money too, i.e a mortgage adviser. Once you factor in insurance advisers, that leaves very few kiwis seeking investment advice, retirement advice, or general life planning advice. Much fewer than 10% of the nation.
31% of kiwis not seeing the relevance of advice for them, 17% preferring to manage their own money, and 12% believing they have enough knowledge to manage on their own. 60% of kiwis thinking they know enough or that there is no value.
The main reason is cost. Half of kiwis believing advice is too expensive. 13% also not understanding what an adviser does or the value they bring.
I even try to help provide free resources for those who see cost as a barrier. I have hundreds of blog articles and almost 90 calculators that are readily available on the website. But these resources should only ever be starting points. Not used for full financial planning.
The irony is that although the cost of financial planning is the biggest reason for kiwis not getting financial advice, kiwis may be much worse off by not getting the financial advice. In other words, in many instances it is actually more expensive not getting advice. Done right, financial planning is a value add service.
What are the dangers of DIY investing?
Knowledge
Even if you feel like you know everything there is to know, there may be something you are missing. Everyone is an expert on stuff they know about. But what about the stuff you had no idea that even needed consideration?
There could be areas of your thinking that you had not even considered for your financial planning. Not acknowledging these areas or implementing a plan for your blindspots, can prove costly.
Financial Advisers can help fill any knowledge gaps you may have. Worst case result is you get confirmation that you are doing things 100% correct (pretty rare by the way).
Even I have my own Financial Adviser. We are all biased in our own lives so much, that blind spots affect us all. It’s not that I lack the knowledge. I lack the independence from my own life. Just like the best sportspeople have coaches. The feedback and direction is essential.
Relationship disparities
In relationships, often (but not always), one partner holds more sway or is more engaged in the financial decision making.
This can lead to resentment from one partner who has less input or less of a say.
Your partners goals are equally as valid as yours, and the benefit of a Financial Adviser is they can offer objective planning that best suits the partnership.
Having a plan that suits both in the relationship can not only help your finances, but also help the relationship.
Time
Financial planning is not a set and forget thing. Things change frequently.
Look back 5 years and see how much your income, spending, lives, and goals have changed. Now try 10 years. I bet a lot has changed.
Well your financial plans need to be updated as your situation changes.
Not everyone has the time available to keep things up to date. Not giving your finances the time they need can be extremely costly.
For others, some have the time but not the willingness. They really just don’t want to do financial planning. They would rather sandpaper a hungry tigers rear in a locked phone booth.
Many of my clients are incredibly smart people, but are time poor.
This is as good a reason as any to get financial advice. An adviser can ensure you keep your time focused on other things.
Emotions
When coming up with our own financial plans, we are very involved in the process. When things don’t go to plan we may take it personal and try to make unnecessary changes to try and correct course. These changes may make the situation even worse.
A good financial plan is one that allows for all economic conditions and gives you the best chance at staying the course. Not only that, but an advisers experience and calmness can help you stay the course when you are thinking of doing something spur of the moment or silly.
Life only gets more complicated
Kids, gifting, inheritances, downsizing, rental properties, upsizing, relocating, retirement.
As you age, hopefully the amount in assets you hold increases. With this comes responsibility, but also more options. Deciding what is the best use of the money can become harder the more you have due to the number of options now available to you.
An adviser can help make things simple by researching and analyzing the options in the context of your goals and provide the best recommendations for you.
It can be extremely costly to choose the wrong option or path, or to feel decision fatigue and not choose anything at all.
Motivation
Some people can come up with a plan but they don’t implement it. They only implement parts of it or they give up.
Others analyse so much information, sometimes with conflicting information, that they get stuck and don’t make any decision at all.
Information without action is a complete waste.
A good Financial Adviser will help provide a easy to implement plan, so you can just pull the trigger and take action.
Other times an Adviser can motivate you to making life changing decisions. Maybe you want to take a year off work, perhaps retire early, maybe buy a holiday home, change career, or move somewhere else. Having an Adviser run the analysis and tell you what is possible can be quite the motivation you need to take that leap to get what you want in life.
Final thoughts
Don’t let another year slip by where you are just going through the motions. You can do better.
There are pockets of the internet where people love to seek out financial advice from random strangers. Looking at you reddit personal finance NZ. However, the people posting replies don’t know your situation. You can write a five paragraph post but they still don’t have enough information to make ideal recommendations for you. Good advice requires far more information gathering. Anything else and you are getting sub optimal, cookie cutter advice that doesn’t work for you.
As an Adviser, I obviously have an incentive to encourage more kiwis to get financial advice. But, as per the report linked to at the beginning of the article, there is less than 10% of kiwis getting financial planning.
That is a lot of kiwis that are going to be worse off than they would be with some advice. The cost of not getting advice sounds cheap on the surface. Zero dollars. But you are likely to be paying for this decision by having a sub optimal plan.
There have been studies conducted, here is one, that find the clients of Financial Advisers earn around 4% per year more in investment returns than those without Advisers. Not to mention the other benefits received from Financial Advisers of time saving, peace of mind, and help with making big life decisions so clients can live their best life. This study was conducted by those involved in the industry, but similar findings have been found with overseas studies done by independent research houses. This is a significant impact.
Those getting advice from the internet may in fact be even worse off than not getting advice at all. General advice applied to specific situations is a recipe for bad advice.
I hope today’s article helped share some insight into times where you may want to hire a Adviser. Also have a read of my article that details some common financial planning errors that I see.
I’m always happy to have a free no obligations chat for any potential client to see what I do and ask any questions. Maybe you can find out how I can add value for you too.
If you need some help with developing and executing a vision and plan, then get in touch today.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here