Personal investing

Should you see a financial adviser?

With World Financial Planning Day happening on 4 October, there is no better time to get your financial house in order. If you have never sought the help of a financial adviser, you may be wondering whether there is any value in seeking advice from an independent professional, or if you should go at it alone.

Although not every investor may need, want or be able to afford an adviser, there are times when seeking professional advice makes all the difference.

Good, independent financial advisers (IFAs) play an important role in helping you make decisions that are right for your circumstances. While many investors are reluctant to take on the advice fee, advisers can make and save you money in the long run, earning their keep time and again.

So when should you seek counsel, and when should you ‘wing’ it? Here are five prompts:

1. You want to put a plan in place, but you have no idea where to start

A financial adviser can help you develop a long-term plan that meets your objectives. If you have money to invest take the time to consider your long-term needs. Do you need to save for your child’s education? Do you need retirement savings?

An IFA can help you shape all your future commitments into realistic goals. An IFA will also help you to keep on track in uncertain times.  Remember the golden rule: if your circumstances don’t change, your plan shouldn’t change.

2. You need to choose an investment product, but you suffer from analysis paralysis

There are so many different products available that the choice itself can be a huge barrier. Different products suit different investment objectives – some have tax benefits and others have restrictions that you need to be aware of before committing. It’s important to read and understand the fine-print.

While researching every product that is available is not impossible, it can be overwhelming and time-consuming. An IFA will assist you in working through the options and making choices suitable for your unique situation.

3. Your life circumstances have changed – or are about to change

Getting married or divorced, having children, inheriting a large sum of money, or retiring – different events introduce new financial challenges.

Thinking about how to manage your money during each of these life-stages can be confusing, and balancing your responsibilities can be tough. Financial advice is crucial in order to navigate the ‘how do I…?’ questions that inevitably arise during any of these big changes.

4. You are changing jobs and have no idea what to do with your retirement ‘windfall’

If you are changing jobs, make sure you preserve the retirement savings you have built up. If you do not, your retirement plans are likely to suffer a setback. Not only do you land up spending the capital you have accumulated, but you give up the future compound interest.

To illustrate this, Marais uses the following example: If at the age of 35 you choose to take your retirement savings in cash when you resign, as opposed to preserving it, you will have 40% less to live on when you retire. Put differently, assuming you take 70% of your final salary (escalating at inflation) as a pension when you retire, your pension will run out 12 years earlier than if you had not taken your retirement savings in cash when you left your employer.

A financial adviser can help you stay on track and deter you from spending your retirement savings when you change jobs.

5. You are drowning in debt

If your biggest financial need is paying off debt, it may be premature to seek the services of a financial adviser.

You may wish to rather speak to a debt counsellor. However, as with financial advisers, not all debt counsellors are alike. Only counsellors who are qualified and who are registered with the National Credit Regulator (NCR) may offer debt counselling services.

What if you are not ready to seek advice?                                                  

Hold up a mirror and take a frank look at yourself and your finances. While this may be very tough, especially if we are not prepared to see the truth about your spending habits, it’s a good place to start. The need for critical self-evaluation is a vital first step to making good, long-term financial decisions. It is often this hurdle that keeps us from admitting that we need the help of a professional.   

It is not impossible to invest on your own. However, an adviser has the objectivity and experience to help you meet the full range of challenges you might face and help you stay on track.

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