Become Your Own Financial Advisor
07 Mar, 2021
There are two very frequently used sentences in the finance space that make me groan:
Don’t put money in the share market that you can’t afford to lose
Always seek advice from a financial advisor
I covered off the first one in a blog post and I thought I might offer a few suggestions about the second one today.
How many times have you gone in search of information about investing, found what you think to be good solid information and then had that belief undermined by a disclaimer like “this is not financial advice, always seek advice from a financial professional before making a decision”.
In fact, I run my very own disclaimer - as I’m required to do by law if I’m not mistaken - at the bottom of every email I send:
All information found in this message, including any ideas, opinions, views, commentaries and suggestions expressed or implied are for informational and entertainment purposes only and should not be construed as personal investment advice. I am not an authorised financial professional. Seek out a professional for financial advice.
I am always telling people that I’m not a financial advisor and that anything I say is just my thoughts and opinions. And I’m quite opinionated! Yet I write everything as if the FMA is reading it, I honestly don’t want to hurt anyone, financially or otherwise, quite the opposite, in fact, I just want to help! But it really irks me having to do this because I remember feeling endlessly frustrated when I was searching for information and saying to Jonny “why won’t someone just TELL ME what to do, why do they always have to backpedal and effectively say “hey, try this...BUT I MIGHT BE COMPLETELY WRONG, so you might want to ask around”...
What that disclaimer does for most of us is immediately put any decision we were thinking of making into the ‘far too freaking hard’ basket because we are so worried about making a mistake with our money and we set it aside for us to deal with another day.
Or never.
KiwiSaver is probably the most common investment that people actually take an interest in first. They hear enough talk about it to know that it’s in their best interests to get it right and they might go so far as to locate their own fund, find out what type of fund it is and maybe they might even find what fees they are paying. Then comes the comparison with other funds and the paralysis of too much choice sets in.
“Why won’t someone just tell me what fund to change to”, you ask yourself because surely it would save a whole heap of bother? It reminds me of when my midwife insisted that I create a “birth plan” to which I answered, “I have not a blinking clue, I’ve never had a baby, you’ve delivered 100’s, how about you just tell me what to do OK”? Thankfully she did. Job done!
The reason for all of these disclaimers is because to be a qualified financial advisor you have undergone training to qualify you to give advice and any advice that is given is only done so after the entirety of the client’s financial life has been looked into. For example, no use giving someone advice to pour $20,000 of their salary into an investment when they have a $20,000 credit card bill with an interest rate of 20% is there? It’s handy to know the complete picture and look at the entire situation. So, that is why there is a cautious approach, advice needs to be given with the whole picture in mind.
But to me - the recipient of many a question about money - endlessly telling people to seek financial advice actually acts as a deterrent when people want to discuss ANY matter with a $ in it. This caution just makes the entire conversation around money seem far too daunting and a topic that people feel they can’t handle on their own and because they can’t find or don’t want to pay for advice, they just put their questions away for another day. This is such a shame because most of the conversations I have with people are not actually about the dollars and cents but instead about behaviours and just basic common sense advice, tips and techniques. It’s not so much money advice that people need, it’s life advice and if we felt more comfortable talking about it, then great advice is actually all around us.
Before I started writing this blog I thought the only way to learn about money was to seek out a financial advisor, the supposed experts in the field, so I did go to a couple of financial advisors and way back in 2016 I blogged about that frustratingly dismal experience: How do I find a Financial Advisor?
As a result of these attempts I completely gave up on letting anyone else tell me what to do with my own money and decided that no one cared more about it than I did myself so I decided to take matters into my own hands and educate myself. And I’ve barely looked back since! I did it by actively taking an interest in my/our money and reading, listening, asking and deep-diving into all things personal finance related.
There are instances where I do think it’s appropriate to seek professional advice and from time to time I do direct people to an AFA (authorised financial advisor). But the individual usually has a higher net worth (over $1,000,000) so has made some money but is on the cusp of making a big financial change in their lives. The most common scenario I have found is people who have made money in property but have cashed out and don’t know what to do with their money now. So, I send them to a “fee-only independent authorised financial advisor” and they will pay cash upfront ($2,000 - $6,000) for this service but they will receive a substantial plan to take them forward. They are worth the money you pay in this instance.
I would never direct anyone to someone who was not a “fee-only independent authorised financial advisor” because if you are getting a financial advisors services for FREE you can bet your bottom dollar that they are directing you to products and services that they are getting a kickback from. It is in their best interests to direct you to the products that they benefit from, so beware.
For everyone else, I say “be your own advisor”.
Be Your Own Advisor
It sounds daunting but, honestly, it’s not, you just have to take an interest. And because I’m quite interested in not being a stone-cold broke pensioner, it was not actually that difficult to start researching.
I just started asking questions and I figured that if I kept asking, I might just stumble upon something worth listening to and over the last two to three years with heaps more great resources being produced every month, this has just become so much easier.
I’ve pretty much turned my back on ‘traditional’ investment firms. For a start, I think they have a huge image problem with none of their shiny imagery on their websites even vaguely reflecting who I am and their company structure and actively managed approach just scream “high fees” to me. Knowing what I now know they manage to make the simple seem complicated which is a huge turnoff and I feel too poor to even have them want to speak with me.
New investment providers who have popped up over the last couple of years have picked up on this disconnect between company and customer and the imagery, language, statistics and information they use is in plain English and a lot more inclusive too.
Engagement with their customers or anyone just looking for information is encouraged, ongoing and updated regularly and if something is not clear, well oftentimes you can just pick up the phone and ask or take part in a live chat. There is a feeling of inclusivity about them, not exclusivity which is the feeling I know I got when I first approached some of the big investment firms.
Yes, they are still pedalling products but they know that educating future customers to understand the different ways to handle money and invest so that they can make up their own mind is a far more effective strategy if they want to create a long term sales relationship.
So, please just know that if you want to make a start on creating a better financial future, the information you are searching for is out there, you just need to look for it and apart from personal finance books that are published, it’s pretty much all there for free. The companies you often hear me talk about on my website are well aware that traditionally, in order for us to access financial information we had to get face to face with someone in a suit in a corporate office, so these companies began to just put that information up on their own websites FOR FREE.
That’s why I’m always linking to things in my Sunday email and in my blogs and podcast, I’m encouraging people to seek out information and resources to educate themselves and become their own financial advisor.
There is no ‘right way’
An emailer asked me this week if, given everything I have taught myself about money, would I change my investment strategy or the companies I invest with and that really got me thinking. Because it implied that there is one ‘best’ way to invest, but in my mind, there is not.
Think about it this way, do you have a chocolate brownie recipe, a ‘go to’ recipe for quickly baking something to offer visitors you know are stopping in, or for kids to take to school? Google certainly does, I got to page 14 and they STILL had not run out of Brownie suggestions for me. We all have a Brownie recipe and all of our recipes are slightly different to each other yet they all churn out a mouthwateringly delicious brownie.
A good financial plan is exactly the same. No two are the same and what’s appropriate for my family might not be appropriate for yours but they will have many things in common. There is no one perfect way to achieve financial success. Financial success has a few key ingredients yet the quantities will be different for each person.
So, I encourage you to think about your own unique situation and whether you have debt or savings, property or no property, a family or are single, old or young, woman or man; seek and you shall find information that relates to YOU my friend and then stop second-guessing yourself and just start doing something!
A quick list of Resources
The following is a quick list of resources that I’ve used when I want information. I am constantly sharing resources that I have found if I think they will resonate with people. Some are general in nature, some drill down into the details, but it’s all good stuff and a lot of it is KIWI content too:
Kernel, Hatch, Sharesies, Sharesight and PocketSmith each have their own blogs where they post a wide range of content that is worth checking out.
New Zealand podcasts like The Happy Saver, NZ Everyday Investor, One Up Project and Cooking The Books all have commentary on a huge range of money topics.
Overseas podcasts like Aussie Firebug, ChooseFI, The Ramsey Show, The Pineapple Project, Shes On The Money
International resources like Mr Money Mustache, JL Collins, Frugalwoods
Our very own Mary Holm is endlessly answering reader questions in her weekly column.
The 3 books I recommend the most to people are: The Simple Path to Wealth, The Richest Man In Babylon and Everyday Millionaires
I’m sure I’ve left out some good stuff, so please add some websites, blogs, podcasts and books that YOU have found handy in the comments section below.
It’s all educational and conversational, there is no smoke and mirrors going on here, just content aimed to educate, so you really have nothing to lose by checking a few of them out. And I think that’s what I like most about the personal finance community. For the most part, contributors are not in it for monetary gain, they just want you to succeed. I know I do!
No one will ever care about your financial present as much as you do and you have the power to make it what you want it to be.
