A survey on financial advice estimated anywhere from 70 per cent to 85 per cent of people will never seek it. Yet from the small pool of people who have sought financial advice, 80-90 per cent of those (depending on the survey) will acknowledge the advice they received was worthwhile and provided value.
One of the more curious areas of financial advice is when someone among that small group of New Zealanders who've gone out of their way to seek financial advice, ends up ignoring it.
They remain engaged with their adviser, they continue to pay fees for their service, but when it comes to a particular issue, they'll ignore the advice or continual reminders to address a potential problem.
A good adviser doesn't give advice unless it's aimed at improving someone's situation. Ignoring advice will generally come with a self-inflicted penalty. Somewhere down the track, not taking action will be to the detriment of that person or their family.
A nagging issue may seem inconsequential at the time, but often we don't find out we've made a financial mistake until much later in life. Or alternatively, after life has ended.
Despite repeated attempts, we've had clients just completely ignore the idea of estate planning and specifically writing a will.
Every New Zealand adult should have a written will. Despite this, estimates suggest that more than half of New Zealanders do not have one and every year thousands of New Zealanders die without one.
Sure, the reason for making a will is something people may want to avoid the thought of, but it can have real ramifications when that time comes.
The person or their partner will then be relying on a favourable set of circumstances to avoid a series of headaches if one of them passes.
Firstly, hoping that all assets are in joint names, so the surviving partner can continue to live day to day.
Imagine a partner dying who does most of the day to day financials and has the transaction and savings accounts in their name.
Having an out of date will could cause as many problems as not having one. If you do have a will, when was it last reviewed? Does it reflect your current circumstances?
You should review your will on a regular basis (at least every three years) and whenever you experience a big life change, such as the birth of a child, death of a family member or a separation.
A Power of Attorney (POA) can be an equally difficult topic on several levels, especially for those who don't or won't understand it because they don't think anyone should act on their behalf.
If an elder is losing his or her faculties or has a diagnosis of something like Alzheimer's, eventually some form of care will be needed. Without a POA in place, ask any financial adviser and they'll tell you how difficult it can be.
Those looking out for the person's welfare will need to apply to the Family Court to be appointed as the welfare guardian of a mentally or physically incapacitated person.
Depending on the complexity of the situation, the application process can take some time, while the person who needs help is suffering.
Moving over to financial markets. Opinions on market direction are irrelevant. They can be jarring to hear when someone on TV speaks about them with certainty, but they're still irrelevant.
Advisers worth their salt don't give guidance on market direction. Over the short term no one has any idea.
Over the long term, historical financial data points to various assets classes exhibiting certain performance outcomes. Portfolios are built around those outcomes, according to an investor's risk tolerance.
If an investor wants to remain in cash and fixed interest due to their beliefs about a date yet to be determined financial apocalypse, advisers will be frustrated, but will accommodate those wishes.
Only, the adviser would prefer the investor didn't moan when it got to year five and that financial apocalypse still hadn't eventuated, and the investor's returns had lagged a portfolio containing equities.
Advice is a focus on the process, implementing strategies that are known to work, while addressing gaps and risks.
If listened to and implemented, advice can be quite valuable.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961.
