An independent financial advisor does a lot more than just tell you how to invest your money. In fact, a lot of the work they do is ‘behind the scenes’ so I thought it was a good idea to share this information in a blog. This will give you a better idea of what a financial advisor does, and therefore whether you might benefit from having one.
Develop a long-term strategy for you
One of the predominant reasons people engage a financial advisor is to help them map out a long-term investment strategy to work out how they will achieve their financial and lifestyles goals. This includes what to invest in, how and how much, also when and similar considerations. I believe that adopting a holistic approach will reveal the most efficient and effective strategy because it considers all facets including super, property and shares, tax minimization and so on.
A long-term strategy must be robust enough to accommodate expected market and situational changes. However, it may be necessary to make small changes to the strategy as time elapses.
Engaging the services of a professional advisor to help you with this will yield numerous benefits including reassuring you that you are taking the right approach, ensuring you don’t waste time and money pursuing the wrong strategy, making sure that you have considered various strategies (e.g. an advisor might recommend an approach you have never thought of).
Research investment options and strategies
The financial services industry is very dynamic and always changing. Fund managers are busily working hard to find an edge, a strategy that will help them produces better returns. Also, academic and peer research is published at an increasing rate – again, trying to identify the factors and market forces that will drive future returns.
All advisors must keep on top of these new advances. More importantly, an advisor must work diligently to separate fundamentally sound strategies and products from “marketing”. A fund managers job is to develop products to attract investors’ funds. Sometimes, they pursue this goal at the cost of quality i.e. develop products that sound sexy but lack fundamentals and substance. Such products must be given a wide berth.
I guestimate that I probably only use 1 out of every 50 to 100 products or strategies that I investigate. There’s a lot of rubbish out there so ‘buyer beware’ is a good mantra to live by.
Keep up to date with all changes
It’s not news to anyone that tax, super and compliance laws are constantly changing. So, it is very important that an advisor keeps on top of all these changes. For example, every month I spend 2 hours in a classroom learning about all the recent tax changes (I must admit, it’s not the highlight of my month!). In addition, I attend numerous half and full-day events to keep on top of markets, products, strategies, credit policies, superannuation and so on. This is in addition to regular one-on-one meetings with fund managers and reading lots of blogs and listening to podcasts.
If you don’t use the services of an advisor, you must consider the opportunity cost of doing so, what are you missing out on?
Make sure you don’t make any mistakes
Often, investing is very simple, but it’s not always easy. The best evidence of this is that most Australians fail to accumulate enough wealth to enjoy a (self-funded) comfortable retirement.
It is easy to get distracted by shiny objects. Or react to fear (tons of negative newspaper articles or hysterical predictions). And it’s often tempting to try and take short cuts.
But none of these actions will produce wealth in the long run. In fact, the best case is that will wa
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IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.
