A Financial Plan is a Minefield…..It shouldn’t be

A Financial Plan is a Minefield…..It shouldn’t be

I never know what to make of surveys. I always get the feeling the ones conducting the surveys are a bit biased.

Think about it. When was the last time a survey came out which showed that the company that organised the survey was useless, not required or irrelevant. Turkeys never vote for Christmas so those who organise surveys are hardly going to say the results show you do not need them.

But every so often I come across a survey that together with my experience on advising business owners makes sense.

Generally, I find that business owners do not build wealth or create an investment portfolio which allows them to retire so that they can have a lifestyle they desire.

And that means when most retire they must live off cabbage soup. OK that was a bit harsh. You might be able to afford chicken soup.

But you can probably forget caviar on a regular basis.

This is what happens. We work our butts off in the hope that when we retire we can travel and consume caviar in first class. The problem is that when we are working our butts off we are a bit busy and a bit confused. And this means most business owners do not have a financial plan.

Most think Superannuation will pick up our bills. But as I wrote last week some Superfunds are awful.

So, when a financial planner brought out a survey on investments I was a bit suspect. But as I read it, it made sense simply because it was very similar to what my own findings show.

In summary it said:

  • Over half of us make decisions based on what our heart says – ie we decide based on emotion. The actual figure is 63%. When it comes to getting into or out of investments the last thing you should rely on is emotion. Trust your gut. Trust data. But if you trust your emotion alone it is likely to go wrong and may explain why many investments go wrong because out of that 63% about 35% regret it. Ouch.
  • Parents are underestimating what they need in retirement because 40% of those with adult children are supporting them financially. In retirement not only do you need to feed yourself on cabbage soup but also your adult children. Except they will not accept cabbage soup. They will want something more fancy.
  • Just under half of those surveyed found managing their money was overwhelming.
  • More than half of those surveyed felt they would be more financially secure by the age they now are. This is a real worry.
  • 80% are making sacrifices due to inflation and higher interest rates.

But here’s the blow to the stomach to advisors. Only 35% worked with a financial adviser.

Why? Well, firstly financial planners do not have stellar reputation. There may be some justification for this view.
You give your money (which means you have 100% risk) to a financial planner to invest. If they make money for you, you have big smile on your face and you get to buy an Armani suit or a Gucci bag. And so does the Financial Planner. Happy days.

But if on the other hand your investment portfolio goes down 10% you don’t even get to buy a t-shirt from Big W. The financial planner on the other hand still gets to go to Armani. Or Gucci. You cry but for them it’s still happy days. It just seems wrong.

There are other reasons why people do not use financial planners. There is cost issue which is a real problem when you consider the ones who really need financial advice are not wealthy so cannot afford it.

Then many think their portfolio is not big enough or that they have a simple portfolio.

But here is what I have found.

  • The right financial planner will charge you but ensure the growth in investments more than outweighs the charge.
  • A good financial planner will spread the risk around.

And that is why finding the right one is so important.

The reality is that a financial investment plan should not be hard or difficult. An advisor who can put you in touch with a financial planner is a good start. But sometimes you do not even need a planner. Warren Buffet tells most people to just invest in index funds. But then again you need to know which index funds to put your money into.

Most people put this off until it is too late. Don’t be one of them.

Investments are just 1 step in our 9 steps signature system which give you more time, more daily money freedom and financial freedom. If you are interested in investments or any of our 9 step process please contact us on 1800 440 316 or hitesh@wowadvisors.com.au


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