Many people have an aversion to seeking independent financial advice, and it is often not confined to the serial procrastinator. Whether through ignorance, insecurity or fear, there are a number of underlying reasons why some people tend to shy away from engaging in financial planning. As with one’s health, any delay in looking after one’s wealth can have devastating effects in the longer term, and in this article we explore some of the reasons behind advice avoidance:
- I don’t earn enough money to need financial advice
From our experience, many people believe that there is a direct correlation between the need for financial advice and the quantum of one’s earnings, and yet nothing could be further from the truth. When it comes to financial planning, the only difference between the person who earns R10 000 per month and the person who earns R100 000 per month is their propensity to save. It’s almost impossible to provide financial advice to the person who spends more than they earn. Regardless of income, spending less than one earns opens many doors of possibility for sound financial advice because, in the words of Albert Einstein, “Those who understand interest earn it, those who don’t, pay it.” It’s not how much you earn that counts; it’s how much you are willing to save.
- I need to build my wealth before I seek advice
This reasoning is both counter-intuitive and counter-productive, and brings to mind the wise words of Benjamin Franklin: “An investment in knowledge pays the best interest.” The financial planning and tax industries are hugely complex, and partnering with a qualified, fee-based financial advisor from the outset will boost your ability to grow your wealth. By neglecting to (or unknowingly failing to) utilise the multitude of financial planning tools available, investors can perilously set back their wealth creation. A good financial planner will advise you how to manage your accumulated wealth. A great financial planner will partner with you when you have no worldly belongings and help you create wealth. Find a great financial planner.
- I don’t want to be sold another policy
As Woody Allen once said, “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”. Many people avoid seeking financial advice for fear of being sold yet another policy that they don’t quite understand. Thankfully, the emergence of fee-based financial planning practices in South Africa has added professionalism and credibility to an industry that was tainted by excessive broker commissions and over-zealous insurance brokers. Fee-based financial advisors, whilst still in the minority, charge a pre-determined fee for their financial and legal expertise in the form of a written financial plan which is presented to the client. Any mention in your preliminary meetings of a specific product or insurer is indicative that one should proceed with caution.
- I probably won’t understand the numbers
Undoubtedly the financial planning industry is a highly regulated and intensely complicated one. While a sound financial advisor can be expected (as a bare minimum) to have the requisite qualifications, knowledge and understanding of the industry, the measure of a great financial advisor lies in his ability to reduce the complexities of financial planning to a simple, easy-to-understand plan that speaks for itself. Leonardo da Vinci in his wisdom surmised that “simplicity is the ultimate form of sophistication”. This observation is as true for art as it is for money.
- I’m too scared to face the reality of my financial situation
Denying the reality of one’s financial situation will never resolve it, and as some wise soul once said: the worst lies are the ones we tell ourselves. Refusing to seek advice in the face of financial difficulties is akin to avoiding the dentist upon discovering a decaying tooth. The result is inevitable and the price one pays for delay outweighs any small comfort one might have found while their head was in the sand. Delay may well be the deadliest form of denial.
- My ‘ship will come in’ and my financial woes will be solved
But for the very rare exception, the process of creating personal wealth and financial freedom is hard-won through consistent, intelligent investing over a long period of time. As heart-warming as ‘rags-to-riches’ stories may be, consider it dangerous to hedge one’s bets on the ‘next big thing’ that will eliminate the need for hard work, smart investing and long-term planning. Horace Greeley once noted that, “the darkest hour in any man’s life is when he sits down to plan how to get money without earning it.” The non-financial rewards that flow from an honest day’s work and responsible custodianship of one’s money are immeasurable.
Regardless of the reasons for avoiding advice, the inevitable dangers remain self-evident. When advising clients on their investments, we are often reminded on the mantra: To live like others can’t, you must be prepared to do what other won’t. Delay is inversely proportional to one’s net asset value – the longer one avoids seeking financial advice, so the potential for wealth creation diminishes. When it comes to investing, time is without a doubt your greatest friend and most useful ally. Our advice rings true in the words of Picasso: “Only put off until tomorrow what you are willing to die having left undone.”
Have a super day!