Why does a financial planner ask so many questions, and what should I be asking a potential financial planner? Um... good question.
It’s the ultimate financial goal, right? But trying to find ways to make your money grow can be time-consuming and, frankly, exhausting. When it comes to investments, there are so many things to consider, and half of the information is French anyway!? On top of that, there is so much info out there – some conflicting – you end up not knowing who to believe.
Cherise Enslin from NLD Independent Financial Advisors cuts through all the “noise” to focus on six big factors that could be the reason your hard-earned bucks aren’t, well, turning into even more bucks. Curious? Check it out – you’ll be doing yourself a huge favour…
1. Your own “behavioural biases” are getting in the way
One of the most well-known investors of the 20th Century, Benjamin Graham, once said: “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Behavioural Biases is a school of thought that looks for the repeated irrational mistakes we make when dealing with our investments, from accepting easily available info as fact (oh hey internet) to holding onto losing investments because you don’t want to admit you were wrong… There are over 50 of these biases, so getting to grips with the ones you might be making will go a long way to changing your financial situation.
2. You might not be in the right product
Products have different features and are applicable for different situations (each one has a different purpose), so being in the right one for you is critical. Another important aspect to consider? The tax implications of a product. Yup – good old tax…
Essentially, being in the wrong product based on the purpose of it can cost you money, so make sure your product is aligned with your purpose. Not too sure? Chat to a financial advisor.
3. You’re paying super-high fees
Certain products and product providers come with numerous layers of fees, and these fees can be pretty difficult to figure out. Make sure you know what fees you’re paying and what the fees percentage is. Depending on the product, commission could also be included. If fees are too high, even good product growth won’t result in your investment growing.
4. Your asset allocation isn’t working for you
The major asset classes you can be invested in are bonds, cash, equities and property. Each of these classes carry their own potential of growth and risk, so it’s important to invest in them based on your time horizon (short-term or long-term investments?) and the purpose of the investment (refer back to Point #2).
Tip: Don’t watch your investments like a hawk – this increases the risk of you reacting to your emotions and investing or withdrawing your money at the wrong time.
5. Your financial planner isn’t looking out for you
Your financial planner should be unbiased and unattached to your circumstances; someone who’s able to look at the facts and keep you on the right path, especially when emotions are clouding your judgement.
Instead of just instructing you to do things a certain way, they need to empower you to make your own decisions. Being educated about financial planning and confident in your investment will ensure you reach your goals, knowing that your financial planner is in your corner throughout the process.
6. You’re staying (or getting out) for the wrong reasons…
Know when it’s smart withdraw from an investment – when enough growth has been achieved, but especially in cases where the investment is doing badly and it’s best to cut your losses. Being greedy, or too afraid to accept that you’ve made a mistake can cost you more than you realise. Set limits (both ways) and stick to them.