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Monday, April 4, 2011

The real value of Financial Advice

Whilst many people believe good financial advice is all about picking the right investments, studies in recent years have shown the value of advice goes way beyond that. In fact a recent study by KPMG Econotech showed that people with an adviser would be an average $100,000 better off at retirement.

Having a financial “coach” may improve all aspects of your financial life.

The KPMG study found that people with a financial adviser increase their net wealth by an additional $1,590 in a year, compounding, compared with those without a financial adviser.

Not only does an adviser help you with budgeting and savings strategies, but the act of seeking advice also puts your financial goals at top of mind.

Goal setting improves financial discipline. The research found that high quality financial advice increases both savings behaviour and financial discipline.

This is still just the tip of the iceberg - savings are just one aspect of financial advice.

Other benefits include getting the most out of your super; ensuring you and your family are financially protected against accident and illness; giving directions as to what happens to your money after you’ve gone.

There are many financial benefits in getting advice when dealing with significant life events such as redundancy, divorce, inheritance or moving a loved one into an aged care facility. The right advice in these matters could translate into a better financial outcome for your future.

However, there are also many benefits that are harder to put a dollar figure on. Things like peace of mind; getting more definition around personal goals; relieving stress regarding financial and investment decisions.

Research conducted by CoreData in 2010 and commissioned by the Association of Financial Advisers (AFA), showed that people with a financial adviser are both better planned and happier with their investments than those who don't.

Those who have a financial adviser seem to attribute a deep personal value to having a confidante or coach that can help them to define their goals and discuss their desires, fears and aspirations for the future.

Of course the technical aspects of what is done are vital, but it’s often the emotional context that drives a good outcome for the client.

For example, being confident they will have enough money to last them into retirement; knowing their children will be looked after no matter what happens to them; being sure they are making the right choices for ageing parents – all have deep emotional significance.

Once the goals are in place, it’s easier to make plans for your savings, investments, protection and estate planning, and it’s much easier to feel happy about your finances and your future.

The value of financial advice is much more than the sum of its parts. It’s about defining what you want out of life, and finding the right strategies to get you there.

To get started is often the greatest challenge – make the time, make the call.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL238429. This information does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.