Every six months or so I come across someone who thinks financial advisers aren’t worth the time or cost involved. I can appreciate where they’re coming from and frankly, the financial advice industry hasn’t done a great job of communicating the value we add to clients. The part that frustrates me is when people who genuinely need financial advice don’t know they need advice and don’t know who to turn to. Though I usually see this once every six months, it’s been the flavour of 2015 and I’ll give you an example.
Earlier this year I met with a lady who was referred to me. She understood we offered a complimentary first meeting and figured she had nothing to lose so we organised an appointment. We sat down, started chatting and one of her opening comments was something to the effect of, “I’ve always managed my own finances and I’ve never understood why people have financial advisers.”
This is a line I never bite at. For the simple reason that I had only just met this woman and for all I knew, she may have been a financial wiz.
Nevertheless, I asked her to continue and I listened as she explained her story to me. A hard worker, good employee, launched a couple of businesses and hit some hard times (this is actually my favourite part of my job, I LOVE meeting new people and hearing about their life!). As I listened to the story, fascinated by where life took this woman, I noticed lots of little financial things, mostly good and a couple that could’ve been done better, but the big one was around how and when she accessed her super.
This woman’s age and situation had meant she could now access some of her superannuation prior to retirement. She did, and used the money very wisely to eliminate some debt. The problem was she didn’t understand that just because you can access super, doesn’t mean you should. Superannuation money accessed prior to age 60 has all manner of taxation issues involved. For this woman, it cost her $32,000. And yes, she did call her super fund beforehand and ask if there were any tax implications for her. The telephone operator from the call centre happily told her that there were tax implications for the super fund… Not quite the answer she needed.
As the conversation went on I explained the tax situation to her and why she was up for the tax bill. She finished the sentence for me, “If I had waited one more year, it would’ve been tax free.”
In situations like this, no one benefits from the ‘I told you so’ game. It’s just disappointing to know how helpful financial advice would have been 12-18 months earlier. Without it, the money that is meant to fund her retirement has been gobbled up by an unnecessary tax bill.
There are lots of things we can do on our own, but the consequences of going it alone financially can be significant.
Yes, seeking financial advice costs you time.
Yes, seeking financial advice costs you money.
Yes, having an adviser to call on as your situation changes will keep you from pitfalls.
Yes, seeking financial advice will be one of the best things you do.