Too often, many people – especially those that have some financial know-how, think that their sole knowledge is sufficient to always make sound financial judgement calls. Unfortunately this is not always the case – the benefits of a financial advisor should never be overlooked.
One of the biggest reasons for having an advisor revolves around the relatively new field of Behavioural Finance (utilises variables from psychology and applies them to the actions of individuals in trading and other financial applications). To be frank, investors who lack professional financial guidance are vulnerable to the fear and greed syndrome where they:
- focus on the short-term and ignore the long-term
- do not properly quantify their financial needs, short, medium and long-term
- are loss- averse
- follow the herd
- buy high, sell low
- are ill-disciplined and do not set financial goals
- do not stick to a financial strategy
- listen to the daily “noise” given off by markets and react accordingly
- are not accountable to a third party and thus are more susceptible to short –term gratification at the expense of long-term goals
- fall into expensive financial traps because of lack of knowledge e.g. unexpected taxation, saving too little
- do not see their financial affairs holistically
- do not save and plan for their retirement or for wealth transfer to heirs
- do not protect themselves and their families from the consequences of unexpected family catastrophe
It has been proven that those who set goals early in life, review and work towards them, are the ones who are fulfilled later in life career-wise, financially and with the immense satisfaction of having grown as an individual. In this regard – adding immeasurably to one’s overall quality of life.
A financial advisor has the know-how to help individuals set appropriate financial goals and address a plan for life, covering all areas of family financial planning such as life assurance and income protection, investing, retirement planning and estate planning (including the completions of proper wills and formation of trusts if appropriate).
Like with anything, if you want a job done right, you would usually hire a professional to get the best results. Then why should it be any different when it comes to managing your finances? Your finances are the cornerstone of your future so it should be treated accordingly.
By Michael R Aley CA (SA). CFP, CFA