At a conference in Sydney this weekend I overheard another adviser telling a story about a client who came to him late in life with significant assets that, based on their moderate lifestyle, they would have trouble spending before they died. He told them that they had only a small portion of their assets in Super and had they moved more over when they had the chance they would have saved significant tax but that ship had sailed. This client then said, “oh that’s unfortunate, so you are saying that if we had of seen you 20 years ago we would have far more money to live on?” the adviser replied “absolutely not, you have taken some huge risks that have paid off well for you, I would have advised caution so you would like have less, of course, this was just pure luck”
Financial advisers are not the keepers of a secret rule book that details how to get rich. They have some tools that help them to analyse and compare the VAST range of options for investments and other financial products but ultimately all this information is publicly available and though they might have their ear close to the ground, they cannot predict the future either.
Advisers use tried and tested financial products that produce predictable results and go through a significant vetting process before they are added to the advisers approved product list. Advisers cannot recommend the house down the road or a penny mining stock that their mate at the pub says is sure thing. These kinds of investments can be highly volatile which means that although they could potentially make you a lot of money, they could also lose it, advisers can’t gamble with your money.
ETFs and Robofunds are taking a lot of the arduous work and cost out of investing. These investment options have been in vogue for around 10 years, which has been essentially a bull market since the GFC, and have been giving the more expensive and hands on active managers a run for their money. Selecting a custom designed portfolio can take a lot of time and effort and this can help to provide significant downside protection that might be critical to your needs, but this will not make you money.
Insurance is a big part of financial planning. Unless you have a rich family or a very significant investment portfolio, any investment plan is based on your ability to earn an income. Without income this all falls apart pretty quickly so taking a small percentage of this income to ensure this continues as best as possible is a no brainer. If an insurable event occurs, this is often a significant event and the time off work will mean that event with great cover you are likely not going to be in a better financial position had you not fallen ill or been injured etc. There are a diverse range of insurance products available from different providers but there is one guarantee across all of them, you will pay a premium. So, in most cases, insurance won’t make you money either.
Advisers don’t work for free. Getting to know you and providing you with recommendations that suit your needs takes time and expertise. Advisers more often than not have staff on their payroll, or they outsource documentation and compliance work. They also have significant professional indemnity cover that means that if they step wrong, you get to lodge a claim against them to rectify any financial harm. Once again most of the rules and strategies that an adviser will use are publicly available and you can do this yourself. You pay an advice fee to ensure that you are not missing anything and don’t get caught out and while you might send less to the tax department and avoid making losses due to wise investment decisions this won’t make you money.
Ultimately, YOU are the person who decides if you will “get rich”. If it was easy everyone would be doing it. You can find out what you are good at and work hard at it. A good adviser might help you take an objective view to this process and make you aware of potential pitfalls, but they can never know your job and your aspirations as well as you do. They can also provide you with the tools to help you spend less and save money but this is down to your habits and lifestyle, something only you can control.
Shaun Clements - June 2018