With most things in our life, we get a second opinion of some form or another. From purchasing a new car, changing jobs, getting a doctor's opinion, or entering into a new relationship, we want to make sure it is right for us before we make a serious decision that impacts our future. In these situations, we tend to call on those that we know to be wise, the professionals or experts in our life, to seek a second opinion.
But why is it that so many of us do not tend to do the same for our financial health?
All of us try to save and invest in the best of our abilities to protect our financial future. We tend to invest according to what we hear or read about or as suggested by our close family & friends, bank relationship managers, insurance brokers. But none of these people actually think on your behalf to see if an investment suits you and your family's goals, your risk profile and your time horizon.
The entire approach to investing or even risk insurance is product-centric. So all your investments are made without actually understanding why you are investing, what kind of product have you invested in and whether you will have enough money (liquidity & cash flow) when needed in the future. People need to know "Am I OK?" and unfortunately, this question is never answered, which ends up leaving you confused.
The best way to get an answer is to get a second opinion on your investments from a financial adviser who is a fiduciary and does goal-based financial planning for families. It is good to do a financial fitness regimen once a year to understand on a simple sheet of paper where have you invested, how much are your worth and is it enough for your goals.
Unfortunately, like many Kiwis, neglecting your current and future financial fitness can lead to the following scenarios:
Money with Aussie-owned banks earning virtually no interest. It is calculated that it costs kiwis somewhere between $400m and $900m a year in lost interest – depending on how the numbers are crunched.
Default KiwiSaver schemes with no clear understanding of where your core savings are invested, the associated risks and how much it costs you.
No vision of what your financial future looks like or no defined goals or personal plan to have the best possible chance of achieving what's important to you.
Unanswered questions such as: When can I retire? Do I have enough? Can I afford to buy a boat or a new car and what future impact will this have?
During current times, physical, mental and financial health is of growing importance and getting a second opinion, or even just one can give you the empowerment and clarity needed to reduce some of your stressors in life. We can't change what happens in markets; no one can. Still, the right adviser can give you financial education to understand your current situation, if you are optimising it, and if there is a better alternative to you.
If any of the below apply to you, then it is probably time for another look at what's under the hood:
I'm unsure of what my investment strategy is
I have multiple investments across several platforms with no consolidated view of them all.
I'm not working with a fiduciary
There is a significant change in my life situation such as approaching retirement, inheritance, sale of a business, death in the family etc. and I haven't taken a relook at my finances?
I don't have a personal CFO who takes a holistic view of your financial life on your behalf.
The right investment adviser will help you in reviewing your financial fitness by:
Understanding the financial goals of your family & documenting them
Looking for any financial products which are costly or very risky which could be an apparent mismatch to your risk appetite
Checking the property allocation in your portfolio and how much is the yield
Analysing your investment portfolio to see how you are doing with your goals. Apart from being aligned with your goals, this plan should include any health risks the family might face, detailed investment analysis, succession planning, etc.
Analysing your insurance policies to verify if you have enough and appropriate covers
Studying your cash flows to see how savings can be enhanced and checking how money lying in savings accounts or term deposits can be invested better
Regular tracking and reviews of your portfolio
If you are managing your situation independently or if you have another adviser, by taking a spare hour of your time to seek a second opinion on your financial health can only give you more confidence to continue on your same path, or steer you towards a better journey. So, what's to lose?
This article is prepared in association with Alman Partners, Australia. 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 or visit our website, www.stewartgroup.co.nz
