5 expensive mistakes of the unadvised
Sometimes
helping people avoid expensive mistakes can be as valuable as setting you on
the right path to achieving your goals.
People will sometimes say they can’t afford financial advice. But for many, not having advice can be twice as expensive.
Not
only can we guide you along the road to achieving your financial goals but we
can also help you avoid the potholes on the way.
Some
common mistakes made by clients who haven’t received financial advice and ways
on how we demonstrate our value in our conversations with you.
1. Too little too late
Most people only go through retirement once in your lives. Many financial planners go through it on a weekly basis. Too often, planners see what happens when people face retirement with too little money to sustain a comfortable retirement and too little time to make up the deficit.
Even
clients that have sought advice earlier in life are sometimes reluctant to
commit to a plan to reach your retirement goals. They cite mortgages,
renovations, overseas travel, school fees and not planning to stop working as
reasons to put off seriously investing in your long-term future.
A
nest egg will give you the freedom to choose to stop working or slow down when
they choose.
The
government has deliberately set up a system that favours those who start early
and stay on track.
The
combination of compound interest and Government incentives favour the tortoise
over the hare.
2. Pay unnecessary taxes and fees
People generally don’t want to pay more tax than they need to. But they quite often do.
Taxes
can act as a drag on our clients’ efforts to achieve your financial goals. This
is where our technical expertise and relationships with specialist tax
accountant can make a huge difference to clients. Working with the accountant, we
can help clients to identify taxes and understand your options.
Here
are three taxes we speak to our clients about:
- 15% tax on
earnings in super for clients over 55
- Excess
contributions tax for superannuation payments
- Potential salary
sacrifice contributions taken as income
- Capital gains tax
on short-term investments
Paying
more fees than is necessary can have a similar effect to the above taxes. Some
examples to speak to clients about include:
- administration
fees on multiple super funds
- self managed
super funds with low balances
- older-style
“fee-guzzling” investment products
- complex
investment schemes that add little value and are not understood by the
client
3. Fall for investment fads
Investing can be very emotional. Envy and greed often tempt clients to chase hot asset classes, sharemarket sectors, managed funds or property schemes.
History shows that this rarely pays over the
long term. Tech stocks, speculative mining stocks and highly leveraged property
investments have all caused financial hardship for a large number of retail
investors.
As
a financial adviser, we can provide discipline for our clients to take the
emotion out of investing by helping you understand your attitude to risk and
educating you on a strategic investment framework that is appropriately
diversified and tailored to your individual risk appetite.
4. It won’t happen to me
Clients are often either unaware or unwilling to admit that risk exists in your lives. We can help you articulate by developing a contingency plan (sometime called a “plan B”).
The
contingency plan includes an inventory of the risks faced by clients and the
way they are currently managed.
5. Fail to plan
As the old saying goes, “if we fail to plan, we plan to fail”.
This
is where we step in. Goals often lie under the surface in a person’s
sub-conscious.
Our value is helping people to identify and
articulate these goals and then to help you visualise what success looks like.
If
your goal is to see the world, ask you to visualise stepping on the plane.
Once
our client’s have the vision, they will be far more motivated to achieve those
goals.
John McAuliffe