28 October 2022

Ask anyone for their opinion on financial advisers and you are sure to receive a mixture of responses. While some of these views may be based on personal experiences, others will be influenced by family, friends or the media. Whatever the source of these views, there are those people that don’t see the value in a Financial Adviser, and there are those who won’t make any financial decisions without consulting one.

So, how do you cut through the noise and form your own judgement about the value of a financial adviser when embarking on your wealth management journey?

5 common financial adviser myths

1. All advisers are basically the same

While every financial planner in Australia operates within the same regulatory environment, this is pretty much where the similarities end for most planning businesses.

For instance, each financial planner has their own distinct client service offering that dictates how often they meet with their clients, how they communicate with clients and the types of advice and services they provide.

Some financial advisers will only work with high net worth clients that meet certain minimum investment requirements (eg $1M), while others will specialise in helping first time investors and people in need of simple cashflow, budgeting and savings advice. The fees involved will also vary significantly from adviser to adviser, as will their investment offering.

2. Financial advisers aren’t worth the investment

One of the key reasons people don’t seek financial advice is that they see this as something they can do by themselves. Why pay a financial adviser when Google can tell you the best places to invest and the best strategies to employ, right? Well, not necessarily. As qualified Financial Advisers, we have an obligation to look at your complete financial picture and provide you with holistic advice that is personalised in nature, rather than provide you with generic information that may not be at all appropriate for your circumstances.

As a general rule, an adviser should be able to demonstrate the value their advice will provide to you over and above the fees that you pay. Otherwise, well, why bother?

Making a mistake when managing your own investment, Superannuation or tax planning affairs could cost you plenty in terms of fines, penalties and investment losses. So, why would you run the risk of achieving a poor financial outcome when professional advice could potentially provide you with so much more.

3. Financial advisers only work with wealthy individuals

It is true that there are many Financial Advisers who, as mentioned above, will only work with clients that meet certain minimum investment requirements, for example, clients with a minimum of $1M in capital to invest. But, if, like most Australians you don’t fall in to this category but you are simply seeking good quality, affordable financial advice, the good news is that there are plenty of options available to you.

The financial planning industry has evolved over the years to offer a broad range of advisory services to people at all stages of life, from first time investors through to experienced, high net worth individuals with complex structural needs. The key is to do your research and identify a shortlist of those advisory businesses whose advice offerings align with your needs and objectives. Most financial advice businesses will offer you a cost and obligation free initial consultation so be sure to take advantage of these to determine which Adviser is the best fit for you.

4. I don’t need a financial adviser

While financial advice may not be for everyone, you might be surprised to learn that a financial adviser can offer valuable advice in the majority of instances. Considering the myriad of tax and superannuation legislation that exists within Australia, and the vast array of investment possibilities that are available, a qualified financial adviser can add substantial value to your life.

Whether it’s building long-term wealth in a tax-effective manner, protecting your income and / or family in the event of illness or death, saving for that big ticket item, or simply putting together a detailed cash flow analysis and budget, a Financial Adviser’s experience and knowledge of these areas can add significant value over and above that which can be achieved if you choose to go it alone.

5. I will lose control of my investments

We often hear the horror stories about investors losing money in elaborate “ponzi” schemes which makes us understandably nervous about entrusting other people with the management of our hard-earned money. And while it is important to do your homework on an adviser when you first start seeking financial advice, you should be comforted by the fact that Australia’s financial market is one of the most heavily regulated in the world.

When you do begin working with an adviser, depending upon your personal preference, you can choose to have as much or as little input into the management of your investment portfolio as you wish. Some investors are more than happy to defer to the expert and leave all investment decisions to their financial adviser, whereas others may prefer to be involved in the process of investment selection and implementation. Whatever method you select, your financial adviser will review your portfolio and circumstances with you at various intervals throughout the year and will be able to provide you with regular investment valuation and return reports upon request. Furthermore, all major investment platforms offer you the ability to log in and view your investment holdings online at any time of day or night so you will always have complete visibility over your investment portfolio.

What does a financial adviser do, exactly?

Financial advisers can provide you with a broad range of Wealth Management services such as investments, superannuation, insurance and retirement planning, amongst many others. They have an intimate knowledge of the regulatory environment that exists within these areas and will work with you to construct a personalised plan that seeks to achieve your goals and objectives.

Specifically, your financial adviser can provide you with professional advice in these areas:

• Assessing your current financial situation. Before embarking on your journey to financial freedom, it’s important that you understand your financial starting point. Your Financial Adviser will work with you to help build your own personal balance sheet and establish a budget to determine any savings capacity.

• Developing short and long term financial goals. It’s hard to build a financial roadmap if you don’t know your intended destination. Whether it’s saving for a large-scale purchase (e.g. a home), investing for your children’s education, or planning for retirement, establishing financial goals in collaboration with your adviser will help them to develop customised strategies for you.

• Handling unexpected changes. Life doesn’t always go according to plan and you might find that your circumstances change when a life event occurs. For instance, you might be faced with redundancy from your role, or you may receive an inheritance. A financial adviser will outline your options in these situations and guide you on your best course of action.

• Professional investment management. An adviser has access to a range of investment solutions and can help to match you with the most appropriate solution. What’s more, they will remove emotion from investment related decisions and help you to make rational choices.

• Making plans for your estate. You may also turn to a professional adviser when it comes to estate planning. Your adviser can help make sure your estate plan is in order by working with you and your legal professional.

Key takeaways

There are many myths about financial advisers. Some people believe that they are strictly the domain of the wealthy, while others don’t see the value in the services that they can provide. Wherever you may sit on the spectrum of opinions, it’s important that you take the time to understand more about the types of services and advice that a financial adviser can provide, because more often than not, there is more to financial advice than initially meets the eye.

Download our financial advice checklist to find out more about how to prepare for your first meeting with a financial adviser.