Financial advice is to your benefit
People have a lot of misconceptions about the role of a financial adviser. I would like to set the record straight on some:
Advisers can't predict returns
This is a fact, advisers don't know what your investment returns will be.
Many investors who seek financial advice arrive at our doorstep with a target return in mind for their investment.
However, these return objectives are influenced by past experiences, historical fund performance or a random number that will fulfill personal expectations. After all, who doesn't want higher returns?
Our role as financial advisers is to estimate the return you require to accomplish your objectives, taking into account your goals, time horizon, current asset base and risk tolerance, among other factors.
Most of the time, the return required to achieve your objectives is less than your desired return. Understanding the difference between required and desired returns can serve a very important function in the financial planning process.
I only need an adviser for insurance
Your financial life is bigger than an insurance policy. Our first job is to get to know you. Financial planning is a holistic process that integrates your life's goals with financial solutions, to create a financial plan.
Many clients want to know: How can I save for my children's education? Do I have enough money saved for retirement? What will happen to my children when I'm gone? How can I protect my income if I get disabled or retrenched?
The goal of every financial adviser is to be the "chief financial officer" of their client's entire financial life.
Advisers don't know how to pick shares
It is a fact. Financial advisers are not all great portfolio designers or great stock pickers or great investment strategists.
There is an assumption that a financial adviser, trader and investment manager are the same people. They are not.
Financial advisers are in the business of behaviour modification and partner with other specialists to make your financial plan a reality.
To use an example from medicine, if your GP believes you need specialist treatment, they will refer you to a consultant.
You only need an adviser if you have a lot of money
You can benefit from working with a financial adviser because you have competing financial goals - not necessarily because you have lots of money.
You may be thinking about buying a house, starting a family, travelling the world or any number of other things.
All of these goals are competing for a slice of your salary, so setting your priorities and adjusting your savings percentages with an adviser becomes a requirement.
As life goes on, your needs will change and your financial plan needs to keep pace.
Advisers charge for advice I can get for free
It is safe to assume people take financial advice from friends rather than a professional because of the cost, but you could be losing out on more than just the adviser's fee.
To use another medical comparison, you can Google the symptoms of your illness online but that doesn't mean a medical consultation is free when you go to the doctor.
A qualified financial adviser is an individual whose job it is to get the most out of your finances and the benefits are likely to outweigh the costs.
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