Helping to build trust in financial planning is one of the key areas we want to address in 2022 at. So, let’s start with the benefits of working with a financial planner.
Having seen the impact that good financial planning can have on an individual’s wellbeing, we have long believed that having confidence in your financial situation can directly result in a happier life. I was therefore happy to see that there has been significant research in this area in recent years, and some of the key findings are highlighted below:
• Individuals who worked with a financial planner had an average of about $60k more after 10 years.
• Individuals who talk to their advisor regularly are 50% better off than those who took advice once.
• Individuals saw about $41k increase to the value of their pension and about $21k a in the value of their other financial assets.
• Feeling more confident in your financial plan.
• Feeling in control of your finances.
• Greater peace of mind.
So why are the benefits to financial planning so great? It’s not necessarily for the reasons you may think. Financial planners will do all the things that you would expect them to do; ensure your assets are held tax-efficiently and make sure your investments are diversified and suitable. However, contrary to what some people may have you believe, there are no magic solutions out there. The funds we’ll recommend aren’t going to double in value overnight and we don’t have access to miracle products that will mean you never pay tax again.
One of the most important ways that financial planners add value is through behavioral coaching. This is the value that is added by ensuring clients do the right things at the right time to realize their goals. This involves creating a financial plan rather than a series of unconnected actions. It also means not only advising clients when action is required but reassuring them sometimes that no action is needed. This can prevent panic selling and over-trading.
Just having a plan in place can make a huge difference to an individual’s actions. Knowing what you need to do or save each month means you’re much more likely to do this, helping to build and shape your financial future.
So that brings me back to the comment I often see on social media, that financial planning is a waste of time, and something you can do yourself. So, is this true?
In terms of whether you could do this yourself, the answer is the same as for any other profession or skilled trade. What you are paying for are the skills, qualifications and experience of an expert team. If this is an area that you are really, really interested in, and you’re prepared to put a lot of time and effort into researching relevant solutions and sourcing the relevant tools, then yes, you can probably build a basic financial plan yourself.
However, just like with anything, it’s unlikely to be as comprehensive as one designed specifically by a professional to meet your needs. If you are interested in talking with a financial advisor give us a call today! Our Worthwhile Wealth team is always ready and happy to help!
1 Source: ILC; What its worth – Revisiting the value of financial advice, December 2019
2 Source: Royal London customer research; Feeling the benefit of financial advice, September 2020.
This commentary was originally posted by Lisa Tipton April 18 2021
**Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.