5 expensive mistakes of the unadvised

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.

 Our value is in education and discipline.

 

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.

 Our role then is to deliver a structure and strategy to give you the best chance of achieving your goals.

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.

 And by maintaining an ongoing service relationship, we help you maintain a long-term investment focus, practice dollar cost averaging and rebalance your portfolio in line with your strategy.

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.

 We can then work together to identify any gaps in your plan B and show you your options in relation to managing those risks.

5. Fail to plan

As the old saying goes, “if we fail to plan, we plan to fail”.

 Clients are very unlikely to achieve your major life goals, if they fail to first articulate those goals and secondly put a framework in place to achieve you.

 

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.

  If your goal is to pay off your mortgage, ask you to visualise what it will feel like to make your last payment.

Once our client’s have the vision, they will be far more motivated to achieve those goals.

 We can you help you on the best strategies to achieve those goals. Call today on 07 3848 1088 or email

 

John McAuliffe