An adviser can make you wealthier!
Not taking independent financial advice can adversely affect your wealth. Here’s how.
Irrational actions are unfortunately common to everybody at some stage. Rational decisions are well informed, consistent and not influenced by emotions such as hope, fear, anxiety and greed. As an investor your unpredictable behaviour may prove extremely damaging. Such decisions may have a significant impact and they may be wealth reducing decisions.
How you can ‘save you from yourself’
Psychologists have studied behavioural finance and the way that investors may act in illogical ways. An adviser can help with your financial behaviour, often ‘saving you from yourself’ by encouraging you to go against your natural instincts. For example the instinct of herding, by making decisions on the basis of what everybody else is doing can mean taking too much risk at the wrong time and not enough risk at the right time.
It is important that investors look to the longer term, considering a portfolio as a whole and not as individual investments. Decisions are often made in times of volatility when a short-term decision to sell a good investment and take a profit when it should continue to be held and holding onto the poor investment in the hope that it will ‘turn around’ when it may be better to sell it for a better option. This is where emotions can override the facts and common sense.
Rock-solid independent financial advice is the best foundation for wealth
Taking independent financial advice can provide positive outcomes by building diversified portfolios, which mitigate against the potential to make rash short-term decisions and accentuate the need for making decisions for the longer term. Long-term objectives and goals are more likely to be achieved by concentrating on what the client is trying to achieve.
By concentrating on diversification in all markets, an adviser can help educate, ensuring that the client becomes neither overconfident, perhaps in a bull market when their investments have done well but also not over pessimistic perhaps when the markets are flat or falling.
Unbiased, the Independent Financial Adviser Web site has researched the benefits of using a financial adviser. They have found that the average advised client had more than double the invested pension funds than those who were non-advised. By taking independent financial advice, a client tended to put one third more money into retirement planning; and when investing they tended to save for longer, contribute more and saved on average £40,000 more than those who did not take advice.
They found that those who took advice got invested, stayed invested and ended up being wealthier. They felt more secure about their money and they focus more on their goals.