Alexander Forbes financial planner Rita Cool explains the value of having a financial adviser to guide you in financial decisions.
Research suggests that engaging with a trusted and qualified adviser and making the correct financial planning decisions can add 1.82% a year to a client’s returns over time, compared to someone without an adviser.
This is not due to the adviser’s knowledge of investments and choosing the best portfolios each year.
People with financial advisers have a sounding board, an expert who helps them take emotion out of the equation and make decisions based on fact, not on popular thinking or hearsay.
People with advisers tend not to make as many changes to their portfolio, as this often destroys value. They also invest for a longer time and in products that suit their needs.
An adviser is there to help you understand financial jargon and to look at your and your family’s goals and how to achieve them.
Those goals are not always as far away as retirement but also short-term goals like how to best get rid of your debt, save for the dream family holiday and for your children’s education.
Financial advice should not be a once-off transaction but a journey towards your financial well-being.
These days the facts about finance are readily available and people ask why they need to engage an adviser and pay money for the service if they can get the information for free.
The information might be available but it can’t take into account your specific requirements. Very often the information is out of date or not correct if read in isolation.
The South African financial industry is a fast-changing industry with new legislation being implemented almost annually. Obtaining the correct information and applying it correctly often saves you money, even after taking into account any advice fees paid.
A good financial adviser is also there in times when things don’t go as planned. When you get retrenched they can help structure both a budget for the period when you are not working and your severance payment to maximise the benefit.
The adviser is able to advise on facts rather than emotion during this period. Also, at other life events such as divorce or death, an adviser can add value by looking at the bigger picture.
For example, the will that needs to be changed, or how to best include your retirement funds in the divorce settlement agreement.
The value of a financial adviser might be priced in money but it goes far beyond the amount you see on your statements. The value should be defined in intangible terms, such as bringing peace of mind or helping you achieve your financial well-being.