Security, structure, clarity, confidence, flexibility – the benefits of holistic, personalised financial advice extend much further and deeper than many people imagine.
Overview
What services do automotive mechanics provide? Most people would answer vehicle maintenance and repairs – including brake testing, wheel rebalancing, and a myriad of other services. That’s the ‘what’. But what about the ‘why’?
The answers to this second question would include the need to feel confident we can get ourselves and our families to where we want to go safely, reliably, and efficiently. This is the real value a good mechanic delivers.
We can apply a similar framework to financial advice. On the surface, what financial advisers provide are services related to investment, such as asset allocation, retirement planning, cash flow analysis, risk management, and estate planning.
But as with brake testing and filter replacement for mechanics, these are just tools in the service of why people seek out financial advice. And that comes down to a need for security, structure, clarity, and flexibility in their financial affairs.
At its core, financial planning involves documenting your life goals, determining the financial resources needed to achieve them, and developing a roadmap to get you there with the least amount of risk. As your goals evolve, the planner is there with you to adjust the plan as necessary and keep you accountable to it.
Services like risk assessment, tax structures, portfolio management and systematic rebalancing are how those significant benefits are achieved. They are the means to the desired ends of the client, which boil down to confidence and peace of mind.
Advice as Evolving Process
Good advice is not a set-and-forget or transactional service. It really is a holistic and evolving approach to each person’s changing circumstances and goals, one that takes account of both market and personal developments.
Our lives are not static. Stuff happens. We change careers. We buy businesses. We sell businesses. We move house. We marry. We have children. We divorce. We look after ageing parents. We face health issues. We reassess our priorities.
This is why an ongoing productive relationship with a professional, independent adviser is so important and why it can be such a good investment in itself. In fact, research shows advice can add up to 2% per annum in returns by using a disciplined, evidence-based approach while avoiding the common errors of DIY investors – like market timing, over-trading and insufficient diversification. Advice, properly defined, is not about selling product, making economic forecasts, or picking stocks, but about giving people a solid platform to take advantage of the opportunities – and meet the inevitable challenges – that life presents.
Seven Roles an Adviser Can Play
A professional adviser can play any number of vital roles. Here are seven key ones:
- A Pathfinder
The first and most vital step in a financial plan is articulating one’s goals and values. What do you most want out of life? What is important to you? The adviser in this sense acts as a guide, showing you how you might get to where you want to go. There is no single route, by the way. There are often a number of choices, each of which may involve trade-offs. But what you get out of this process is clarity and perspective. - An Educator
The media’s perspective on finance and investment is, by necessity, short-term. But the daily market report is a world away from what matters to each person in reaching their goals. The real mission is to help people make sensible, well-informed decisions about their money. And that requires an adviser who makes investment understandable and accessible, rather than a mysterious activity hidden behind the veil of assumed expertise. - A Coach
There is a big gap between the returns delivered by the market and what most investors earn. This usually is due to people’s own behaviour in chasing past performance, trying to time entry and exit points, failing to sufficiently diversify, not paying attention to cost, being governed by emotion…the list goes on. Good advice can reduce the influence of these human foibles and keep you accountable to your original intention. - A Coordinator
Most people have multiple commitments – to families, careers, businesses, community, sport, and hobbies – with little time left over to manage their financial lives. A good adviser can bring structure and coordination to this challenge, creating much-needed space for each person and offering calming reassurance amid the day-to-day noise. - A Trusted Source
A lack of information is not the world’s biggest problem. If anything, these days it is the opposite. We are deluged with news, reminders, email, social media and opinions about what to do and what not to do. Financial advice can function as a filter, reducing the volume of the noise and pointing you only to what is both important and relevant for you. - A Sounding Board
Life is full of complex choices that often involve difficult trade-offs. A professional adviser who knows you and what you value can provide a sounding board at such times. You often will sense the right answer, but the conversation with a trusted professional can bring it to the surface and clarify it for you. - A Lighthouse Keeper
Most people are good at knowing what they need to do in the next day or week. But it’s often the issues lingering over the horizon that prove most challenging, particularly if not addressed promptly. In this sense, a good adviser is not just watching out for your circumstances as they are today, but how they might change in the years ahead and the steps you need to take now to be ready for them. Of course, this also extends beyond your own life, to the welfare of the next generation.
Who is Advice For?
As wealth, financial complexity and time pressures increase, so does the need for comprehensive, ongoing financial advice.
Advisers can keep you organised, accountable and disciplined, while ensuring you do all the simple things right. They can also take care of much of the burdensome financial administration. That in turn frees you up to focus more of your energy on other parts of your life that need attention. If your affairs are less complex and your wealth more modest, an ongoing advice service may not be justified early on. Even so, virtually all of us need a plan and some means of being kept accountable to it. In these cases, it may be worth seeking one-off advice to develop a plan that you can implement yourself. As time moves on and as your circumstances evolve, you can come back and get your plan updated.
Summary
You can see that financial advice is not about which stocks to buy or predicting when interest rates might rise or fall. It’s not about which is the best performing fund this year or whether now is a good time to get in or out of real estate.
Good financial advice is a holistic service that provides structure, organisation, and clarity to people’s financial lives, recognising the real-world frictions in markets and the personal challenges and opportunities we encounter as time passes.
Those with greater wealth or complexity benefit most from ongoing financial advice, although everyone at all stages of life needs some kind of plan.
Perhaps a good adviser is not so much like an auto mechanic, but more like a conductor – someone who brings harmony and structure to people’s material lives.
And that’s where the real value lies.
