The whole point of earning money is to use it in ways that will add to our overall sense of wellbeing and to help us live more happy, flourishing and prosperous lives.
The article basically makes the following arguments against seeking professional financial advice:
- When you DIY it will help you spend less
- You should DIY first before you hand your financial management over to someone else
- You may have it in you to do it all yourself
- Financial advisers charge you fees
- There are non-financial costs in working with a financial adviser
- You will have better ‘asset allocation’ if you DIY
- DIY will allow you to make adjustments to your portfolio more easily
OK, before I give my alternative view, I need to first state of course that I am not a financial adviser, and therefore am not giving financial advice – I’m simply making a counter argument to what’s been reported in the above post.
The second is to declare my advocacy for the financial advisory profession. Liz and I would not enjoy the lifestyle choices we have today if it were not for the financial and lifestyle advice our financial advisers have provided us with.
So having provided you with that ‘disclaimer’, here’s my key point… in Australia at least, it’s obvious a DIY approach to financial management isn’t working.
Proof – DIY financial advice isn’t working
I did a bit of research and again numbers aren’t my strong point (that’s why we have a financial adviser), the latest figures I could find from the Australian Bureau of Statistics suggest that there are approximately 3.5 million people in Australia who are over 65 and potentially retired. Of that number, there are approximately 300,000 DIY or self-funded retirees which represent about 8%. That means the remaining 92% are potentially on either a full pension (some research suggests about 56% of retirees are on the full pension) and the remaining on a ‘part pension’.
Figuring that the full pension is approximately $22k annually ($32k for a couple), that’s a far cry short of the typical earning capacity of the average Australian at the time of their retirement and therefore short of being able to potentially fund and sustain a happy, flourishing and prosperous retirement lifestyle.
So again, obviously leaving the nation to DIY financial management hasn’t worked to date, and I can’t see any reason why it will work in the future.
Sure, what’ needed is more education on how to better manage the financial resources we have, but just knowing the basics of spending less than you earn and putting your money in savings accounts or term deposits obviously doesn’t guarantee you won’t end up on the pension anyway.
Mindset | Trust | Risk
There are a few issues underpinning Australia’s reluctance to seek out and be willing to pay for financial advice. They are (1) Mindset, (2) Trust and (2) Risk.
The financial advice industry has a basic branding problem in that most Australians just don’t get the value of what a financial adviser can do for them. Financial advice seems to be everywhere. It’s in the media, on the net, and available for anyone with an opinion at a family bbq. The reality is, the financial advice is only one piece of value (and arguably not the largest piece of value) of the total value a professional financial and lifestyle adviser can provide.
We need to change the mindset of Australians (and in my opinion, many still within the financial advice industry) on what value is really created through financial advice that is aligned with intentional lifestyle goals.
The second issue, which is related to the first, is Trust. Because of the confused mindset of Australians on the value of financial advice, trust is at risk. The financial advice industry has added to this confusion recently, and paradoxically it’s because they’ve legislated the importance of ‘acting in a client’s best interest’.
Really? How sad for the majority of ethical, professional, client-focused financial advisers, that a few cowboys who have brought their industry into question, that the recent legislation changes just seem to muddy the waters of what in the main are solid client relationships, and fracturing the levels of trust because of a question of the real intention of a financial adviser.
And finally, the other element holding people back from seeking financial advice is the confusion over Risk. The mindset shift and education that is required for the majority of the population to understand that risk is not only about the ups and downs of the share market, or property market or interest rates, it’s the risk of leaving their financial management to ‘chance’, and to limit their potential to live a more happy, flourishing and prosperous life.
Let me conclude this post, not with advice, but a challenge.
And the challenge is, on a scale of 1 being “I’m in real trouble” and 10 being “I am free of any financial worries”, how would you rate your current financial position, and then pick a date in time, and maybe it’s by age 55, 60 or 65, but pick an age, and how do you believe your financial position will be then.
If you’re not rating it at higher than a 8 or 9, and if you’ve been a DIYer when it comes to managing your financial future, perhaps you need to reconsider that approach… or at the very least, make some changes that will increase your personal confidence in your financial and lifestyle future.
And… if you’re a financial adviser and you’re not confident in how to articulate and deliver on your value beyond the value of your financial advice, you’re part of the problem!
David Penglase CSP