Busting the myths about financial advice
By AMP Financial Planner Robert Inukihaangana
We all look for professional advice when it comes to building a home or diagnosing an illness. But according to research, between 60 and 80 per cent of Australians have never used a financial planner.*
Many people don't seek financial advice because they're embarrassed about their financial situation, they don't have enough money to invest or they think it's only relevant for retirement planning.
Everyone can benefit from visiting a financial planner whether they're young or old, high or low income, single or married. Financial advice can help people save money, protect their loved ones and build wealth for the future.
Five myths and facts about financial advice:
Myth: I don't have enough money to invest
Fact: You don't need a large lump sum to invest or a high disposable income
Everyone, regardless of their income or how much savings they have, can benefit from visiting a financial planner. You don't need to be a high net worth individual to reap the rewards of advice. Financial planners can help with everything from budgeting and debt management, through to superannuation and retirement planning.
Myth: It's only for people who are close to retirement
Fact: It's never too early to seek advice
Many people don't think it's necessary to visit a financial planner until they're approaching retirement. While it's never too late to seek advice, it's also never too early. Young people who are just starting their working life can benefit greatly from financial advice. People who establish good money habits early on are less likely to develop financial problems later in life. Also, the earlier a person starts building wealth, the better. For instance, salary sacrificing into super from a young age can dramatically boost a person's nest egg due to the effects of compound interest.
Myth: I don't need it and I don't have the time
Fact: It's one of the most important things you can do
Money issues are often delegated to the 'too hard basket', but there can be devastating consequences if people bury their heads in the sand. Most Australians don't have adequate insurance to protect their loved ones in the event of loss of income. The big four are life insurance, income protection, total and permanent disability insurance (TPD) and trauma insurance. It's also vital to have a will to ensure the right funds end up in the right hands at the right time and an enduring power of attorney to enable someone to look after your affairs if you’re incapable. People with kids also need to consider guardianship.
Myth: Planner fees are too costly
Fact: You can't afford not to have financial advice
Many people avoid visiting a financial planner because they are worried about the cost, but when you consider all the benefits of advice, it is good value for money. Planners sometimes offer a free initial consultation or a discounted first fee so people don't have to engage in the complete financial planning process straight away. People who want to spread out the cost can opt for scaled advice, which addresses single financial issues at a time, such as budgeting, insurance or superannuation.
Myth: I won't get independent advice
Fact: It's all about choosing the right planner
It's important for people to take the time to find someone they trust. Look for a licensed planner who does not receive up front commissions on super, managed funds or retirement products. Look for a planner who charges a fair fee for the advice process and a modest fee for implementation. Ask for recommendations from friends, colleagues and family, or contact the Financial Planning Association for a referral. Finances are very personal, so people need to look for someone who understands them and their situation.
*Robert Inukihaangana is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.
*Australian Securities and Investment Commission, Report 224, Access to financial advice in Australia, December 2010